Markets Rejoice on Global Bank Bailout

Asia markets continued America's euphoric reaction to yesterday's historic global bank "nationalizations" with the Nikkei soaring a record 14 percent, the BBC reports this morning. This follows yesterday's huge Wall Street "roar," in the words of Business Week, in which stocks rose 936.42 points, or 11.08 percent, to 9,387.61—its "biggest point gain ever." It was the day the markets breathed again, in the words of the Guardian—the collective sigh of relief enabled by the triple play of a $70 billion bank bailout in the United Kingdom; a combined $1.8 trillion banking sector guarantee from the governments of Spain, the Netherlands, France, Germany, and Austria; and, last but not least, the feverish expectation that the U.S. will partly nationalize nine of the nation's top financial institutions to the tune of $250 billion.

The Treasury Department also is expected to guarantee "new debt issued by banks for three years—a measure meant to encourage the banks to resume lending to one another and to customers," notes the New York Times. It's a power move that "rivals the breadth of the government's response to the Great Depression," notes the Wall Street Journal. Many of the banks are said to be unhappy about government intervention but they "acquiesced under pressure from Treasury Secretary Henry Paulson in a meeting Monday."

For Paulson and the Bush administration, this action is sharp U-turn from its decision just a month ago to let Lehman Bros. fail. "It is profound, and it is something of a shift back to the state,” one economist told the NYT, but you won't hear the government calling it nationalization: That is a "word to avoid, given the aversion to anything that hints of socialism." OK, we won't call it socialism. But no one can deny that we've entered a new era of regulation, and not just to rein in the financial sector. The NYT believes there's a new political mood that will "give impetus to those who seek new emission curbs and energy limits to address climate change, or who want health care mandates to expand insurance coverage and restrain costs; or who are calling for new safeguards for food, prescription drugs and toys from China and other less-regulated trading partners." What example of the death of deregulation do you need besides the sight of "we make the rules" Goldman Sachs applying to be granted a New York state banking charter?

Of course, with such action comes winners and losers. In the United Kingom, three banking chiefs lost their jobs yesterday, and others saw fat-cat bonuses curtailed. And we'll all shed a tear for fast-falling hedge-fund managers who can no longer afford to take hundreds of employees on luxury jaunts to Venice. Then there's Sumner Redstone, the grand old media curmudgeon who was forced to offload $233 million of Viacom and CBS shares to cover margin calls on other loans. At least some Fortune 500 companies are faring well. Fortune takes a look at 12 that are excelling amid the carnage. No surprise that Family Dollar Stores and Anheiser-Busch are on the up.

There were more than a few buds being downed in Wisconsin and Michigan last night after GM announced it would close an SUV plant and a metal stamping factory in those states, yielding the loss of some 1,200 jobs in Janesville, Wis., and 1,300 hourly jobs in Grand Rapids, Mich. At the same time, GM's finance arm, General Motors Acceptance Corps., "tightened the screws" on GM dealers, saying that the company "won't loan money to car buyers with credit scores lower than 700," Business Week reports. So while the Fed and Treasury are trying to keep lending flowing, GMAC "didn't get the memo," the magazine notes dryly.

Finally to Silicon Valley: The WSJ reports that Google and Yahoo are "in talks with the Justice Department in an effort to head off an antitrust challenge to their proposed advertising agreement." Seems that even as far away as California, they can sense the era of Big Government is back.