WASHINGTON - U.S. stock prices edged higher Friday after the U.S. Senate passed the biggest overhaul of the nation’s financial system since the 1930s. The Senate measure must be reconciled with a version passed earlier in the House of Representatives, but it still marks a major policy victory for President Barack Obama. What remains uncertain is the bill’s effect on the world economy.
The European debt crisis continues to hammer global stocks as fears grow that Europe’s problems could have a wider impact.
Art Cashin, the floor director at UBS Financial Services, says many investors worry that the uncertainty in Europe could trigger another global meltdown. “Everybody keeps wondering if Greece is going to be the Bear Stearns of nations. The fear is, if they go under, it might get another set of dominoes moving,” he said.
Despite a $1 trillion rescue plan approved by eurozone nations to give low cost loans to member countries, the continuing weakness of Europe’s common currency has driven many of the world’s leading stock markets to their lowest levels this year.
In the U.S., the Dow Jones Industrial Average fell briefly below 10,000 points on Friday.
But equities analyst Alec Young at Standard and Poor’s says the declines are part of a normal market reaction. “So while we’re not really forecasting another meltdown, we’re more in the correction camp, you certainly have to warn investors that it is a possibility, we could be in for maybe a slightly smaller version of the roller coaster that we went through in 2008,” he said.
The 2008 meltdown brought down some of the largest financial institutions in the U.S. and led to massive taxpayer funded bailouts.
President Obama, who has made Wall Street reform one of his top priorities, says the reform package passed by the Senate late Thursday means financial firms will now be held accountable for their actions. “There will be no more taxpayer-funded bailouts, period. If a large financial institution should ever fail, we will have the tools to wind it down without endangering the larger economy,” he said.
Besides expanding the Federal Reserve’s powers to police banks and speculative markets, the measure also contains provisions to prevent financial institutions from becoming too big to fail. It also gives consumers new protections against predatory lenders.
But Art Cashin says Wall Street remains wary. “The concern down here is it may intimidate some of the financial institutions, and therefore make credit less available and less likely and hurt the recovery,” he said.
Some investors, such as Steven Special, say the uncertainty is too big a gamble. “I’m not investing because of the euro crisis, the euro crisis that is happening. I still think everything is not perfect in our mortgage situation in the U.S., and the dollar is rallying, but that’s a bad thing right now. So yeah, I’m sitting in cash right now, I’m not doing too much investing right now,” he said.
Despite concerns about the impact of reforms on Wall Street, the three major U.S. indexes closed higher on Friday.
Source: VOA News