On Wall Street, leading indices fell sharply on Friday, with the Dow Jones index diving to its lowest level in 6 and a half years, as investors fear that the U.S. government will be forced to nationalize several major banks.
The Dow Jones index plummeted by 100 points or 1.34 percent, to 7,365 points, reaching levels from October 2002, which represented the bottom of the then ‘bear market’. The S&P 500 index fell by 1.14 percent, to 770 points, and during trading, it threatened to drop to its lowest levels in the last 12 years. The Nasdaq index lost 0.11 percent, dipping to 1,441 points. The day after the Dow Jones index fell below the level of November 20 of last year, which investors considered the bottom of the current ‘bear market’, the decline in stock prices continued, due to investors’ fears that the government would nationalize banks in an effort to clean them of bad debts. However, this would also mean the ousting of shareholders.
Yesterday, the chairman of the Senate Banking Committee, Christopher Dodd, stated that it might be necessary to nationalize some banks, at least in the short term. This further unsettled investors, prompting a response from the government. “The government still firmly believes in a privately owned banking system, with the assurance that this system is sufficiently regulated by the government,” said White House spokesman Robert Gibbs at a press conference. This somewhat calmed investors, but not entirely, as Gibbs did not want to definitively answer a journalist’s question about whether this means the government will never nationalize banks. Before Gibbs’ statements, the stock prices of Citigroup and Bank of America were down more than 35 percent, ending with Citigroup down 22 percent and BofA down 3.6 percent. Meanwhile, the price of Citigroup fell below $2 for the first time since 1991.
