Tarpley & Underwood
Financial Advisors, LLC
263 For, 171 Against. What a difference four days make. On Friday, the House of Representatives decisively approved the Senate-revised $700+ billion bailout plan for Wall Street. President George W. Bush applauded the “decisive action” of Congress and immediately signed the bill into law on October 3, 2008.1 This improved economic headlines on a day marked by the release of dismal unemployment and manufacturing data and Wachovia’s announcement that it will merge with Wells Fargo.
What Made the Difference? All the “sweeteners”, as they were termed, apparently had an effect in the House. There were many of them.
In addition to exempting more than 20 million middle-class Americans from the Alternative Minimum Tax for another year and increasing FDIC insurance limits for individual deposit holders from $100,000 to $250,000 for a year, the revised bailout plan extends tax breaks for hurricane victims, college students, and R&D and renewable energy firms.2 Tax breaks for teachers are extended, and taxpayers who live in income tax-free states like Nevada will still get to choose between the deduction for state income taxes and the one for sales taxes.3
THE RESCUE PACKAGE ROLLS OUT
The House approves it; the President signs it into law.
The Federal Reserve Statement.
As the Treasury Department prepared for its new mission to purchase troubled assets, Federal Reserve Chairman Ben Bernanke stated that the Fed will employ “all of the powers at our disposal” to help ease the credit crisis. Speaking of all options at the Fed’s disposal, futures traders Friday were putting the chances of a half-point interest rate cut at or prior to the Fed’s next policy meeting at more than 90%. That meeting occurs Oct. 28-29, 2008.6
If you’re 70 or older, here’s some interesting news: IRA charitable rollovers are making a comeback. Thanks to the Senate revision of the rescue package, taxpayers older than 70½ may again move as much as $100,000 from an IRA to a charity without an income tax penalty. This will apply even to such IRA transfers that happen in 2008, according to a senior tax analyst with RIA, a tax-publication unit of Thomson Reuters.3
The Market Reaction. The market shrugged. Stocks actually lost major gains after the House vote; the Dow Jones Industrial Average was up close to 300 points Friday morning in anticipation of its passage, but it fell 157
President Bush signs the rescue bill into law, October 3, 2008.
Senate Majority Leader Harry Reid (D), speaks to reporters after members of Congress met with SEC Chairman Chris Cox, Treasury Secretary Henry Paulson, Speaker Nancy Pelosi (D), & Federal Reserve Board Chairman Ben Bernanke
Tarpley & Underwood
Financial Advisors, LLC
points on the day.4 Certainly the new jobless data didn’t help, along with news of Wachovia’s proposed merger and AIG’s decision to sell its U.S. retirement and life insurance divisions.5
