- The Washington Times - Wednesday, September 24, 2008

NEW YORK | Financial markets extended their declines Tuesday as investors worried that lawmakers were beginning to doubt the necessity of a broad government bailout for financial institutions as a way to revive ailing credit markets.

Top economic officials updating Congress about efforts to work out a $700 billion financial-rescue plan faced a greater degree of second-guessing from lawmakers than some investors had expected. The Dow Jones Industrial Average added a 161-point loss onto a steep drop from Monday.

Still, trading appeared more orderly than on Monday, when investors rushed into hard assets like oil and gold. Meanwhile, demand remained high for 3-month Treasury bills, considered the safest short-term financial asset, while the dollar regained some ground after being hard hit Monday.

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After days of intense gyrations in financial markets, investors are anxious about whether the plan to absorb bad mortgages and other risky assets will help steer the economy onto more solid footing. They’re also concerned about resistance to the plan in Congress.

Treasury Secretary Henry M. Paulson Jr., Federal Reserve Chairman Ben S. Bernanke and Securities and Exchange Commission Chairman Christopher Cox testified before lawmakers, who are working alongside others in the Bush administration to complete the details of the bailout.

The market remains uncertain about how long it will take for the bailout plans to take effect, and assuming they do, how effective they will be.

The market for short-term Treasurys remained strained. The yield on the 3-month T-bill settled at 0.79 percent from 0.88 percent on Monday; last week, it was around zero after investors flooded money into T-bills as the credit markets seized up. That spurred government officials to propose a debt-buyout plan.

The yield on the benchmark 10-year Treasury note, which trades opposite its price, fell to 3.82 percent from 3.85 percent late Monday.

The dollar, whose decline Monday drove some of the frenetic trading in other markets, regained some of its lost ground against the euro, while gold prices declined after starting the week with a big advance.

The Dow fell 161.52, or 1.47 percent, to 10,854.17 after having risen more than 125 points in the early going and then falling by more than 180. With Monday’s 370-point decline, the blue chips are down 534 points, or 4.69 percent, for the week.

Broader stock indicators also fell Tuesday. The Standard & Poor’s 500 Index fell 18.87, or 1.56 percent, to 1,188.22, and the Nasdaq Composite Index fell 25.67, or 1.18 percent, to 2,153.34.

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