Geithner’s Bank Rescue May Determine Effectiveness of Stimulus
The unprecedented stimulus package that President Barack Obama is trying to wrestle through Congress may end up being wasted unless the administration can find a way to restart stalled credit markets.
Investors are demanding a 5.20 percentage-point premium over U.S. Treasuries to buy bonds sold by companies with investment- grade ratings, more than five times the level of two years ago. The rate on jumbo mortgages is 6.91 percent, almost 1 percentage point higher at than the start of 2007.
The financial-rescue plan that Treasury Secretary Timothy Geithner will unveil today may determine how effective the stimulus will be. Without the ability to borrow to invest in new business projects, or credit for purchases of new cars, homes and appliances, companies and households won’t be able to follow through on Obama’s tax cuts and spending programs, analysts said.