This week has been one of the most devastating in Wall Streetâ€™s history. Just Thursday, the Dow industrial average had been down more than 40% for the year, considered the steepest plunge since the bear market of 1937-1938 according to financial historians, and at its lowest level in a decade. And on that same day, the S&P 500 marked an annual decline of 48.8%, the worst yearly percentage slide in 80 years. Such recent market activity has forced nervous investors to put their cash in ultra-safe but virtually no-return treasury bills. Others just stuffed their bills in the mattress or put a match to them.
But seriously, yesterdayÂ investors were braced for another dismal performance of a market that was in a 620-point trading range. However, President-elect Barack Obama gave the financial markets just the tonic it needed to end the week: a rally.
How did he do it? He reportedly nominated highly-respected New York Reserve Bank President Timothy F. Geithner as his administrationâ€™s treasury secretary. After news hit Wall Street, the Dow rose nearly 500 points in the final hour of trading, gaining 6.5% to close above 8,000. The potential nomination of Geithner signaled to investors that Obama will move quickly on the execution of the last stages of the $700 billion financial bailout, which for weeks has been considered by many observers to have been bungled by the Bush administrationâ€™s indecision and missteps.
Thus far, half the funds of the Troubled Asset Relief Program have been deployed, fueling confusion and frustration within the nationâ€™s financial community. Also, what appeals to investors about Geithner is the fact that as New York Fed chief he has participated in such industry-saving acts as the sale of Bear Stearns to JPMorgan Chase and the multibillion dollar rescue of AIG, one of the worldâ€™s largest insurers. Moreover, he is an experienced hand at Treasury who has worked for five secretaries, including serving as the right hand of Clinton Treasury Secretary Lawrence Summers who, in fact, was reportedly on the short list for the post.
The almost-certain move, along with other appointments, clearly indicates that Obama will be ready to lead on Day One â€“ a criticism he dealt with repeatedly during the primaries and general election.Â So far, the president-electâ€™s transition has been considered the smoothest in history and, if the rumor mill is to be believed, he has proven to have exercised unassailable judgment in his selection of his cabinet, including Eric Holder as attorney general, former Sen. Tom Daschle as health and human services secretary, Bill Richardson as commerce secretary and Sen. Hillary Clinton as