The words
"sell, sell, sell" are apparently being heard loud and clear on
panic-stricken Wall Street, while Uncle Sam's repeated efforts at
reassuring investors that he stands firmly behind the banking system
are falling on deaf ears.
The Dow Jones Industrial Average
continued its massive sell-off on Monday, plummeting 250.89 points to
7,114.78, a level not seen since 1997.
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In an effort to quell the fear
of bank nationalization that began to spread through the market like a
virus last week, the U.S. Treasury Department, the Federal Deposit
Insurance Corp., the Office of the Comptroller of Currency, the Office
of Thrift Supervision and the Federal Reserve issued
a joint statement on Monday saying that the government will ensure that
banks have the capital and liquidity needed to provide credit to keep
our teetering economy afloat. Concurrently, The Wall Street Journal reported
that Citigroup Inc. (NYSE:C) is in talks with the government and is
asking it to convert its preferred shares into common equity and that
the government could end up with a 25% to 40% stake of Citi.
The two
banks that traded down last week on fear of nationalization were one of
the very few that ticked up on Monday. Citi jumped 9.74% to close at
$2.14 per share, and Bank of America Corp. (NYSE:BAC) rose 3.17% to
$3.91 per share.
Nationalization is the least of American
International Group Inc.'s problems. The Federal Reserve, which has
warrants to buy up to 79.9% of AIG as part of a $150 billion rescue
package, may be asked for more from the crumbling insurer. CNBC
reported just before market close Monday that AIG is in talks with the
government for more funding as it is expected to post a $60 billion
loss next week. The talks include the possibility of funds or trading
debt for AIG equity, CNBC reported, citing unnamed sources. In case
they don't reach a deal, AIG could face the possibility of bankruptcy,
the report said. AIG's shares continued to sink following the news,
closing down 1.85% to 53 cents per share.
Most, but not all, was
lost on Wall Street. Nova Chemicals Corp. skyrocketed 288.81% to $5.21
per share on news that Abu Dhabi state-owned International Petroleum
Investment Co. has agreed to buy it for $2.3 billion. - Michael Rudnick
