Wall Street Bursts Obama Bubble

Well that didn't last long. Wall Street's initial election euphoria quickly fizzled "amid more evidence that the economy is stumbling badly," writes the Wall Street Journal. The Dow Jones industrial average fell 486.01 points, or 5.1 percent, on news that 157,000 private-sector jobs went last month, with deep declines in goods-producing industries. Asian stocks tracked Wall Street's jitters, though European markets may yet be buoyed by a near certain half-point percentage rate cut to be announced by the Bank of England today. Wall Street's woes were another reminder (if anyone needed one) of the economic task facing President-elect Barack Obama, writes the New York Times. It lists the wavering financial system, the toxic housing system, and a "once mighty auto industry ... on the verge of implosion" as just some of the immediate problems to grapple with. He's going to need some help quickly, which explains why speculation over Obama's choice of Treasury secretary is rife with Larry Summers. He is the top tip to reprise his former role in the last Clinton administration. Timothy Geithner, "the youthful-looking" president of the New York Federal Reserve is also in the frame, writes the Washington Post.

What will be the role for the "powerful circle of black business leaders in Chicago" that backed Obama, asks Business Week. Top execs like Lyle Logan of Northern Trust Co, real estate guru Valerie Jarrett and investment banker Jim Reynolds have "served as a kind of stealth sounding board long before Obama had a glimmer of an idea about the White House," it writes. Many in business remain skeptical about Obama, observes another Business Week story. Top execs want to know "Obama's top economic priorities, and what will he tackle first? How might they change in light of the ever-worsening budget?"

Yesterday, Google ditched its partnership with Yahoo, under pressure from Justice Department regulators. The move "leaves Yahoo in the lurch and highlights the increasing scrutiny of Google's dominance in the market for Internet search advertising," writes the WSJ. Google shares jumped after the Justice Department notified both companies that it was planning to file suit to block the deal, notes the NYT. With regulators now interested in the search giant's every move, Google could be forced to "rein in its ambitious goals for expansion," the paper adds.

Detroit's Big Three are wasting no time, initiating a new charm offensive with the victorious Democrats. Chrysler, GM, and Ford CEOs meet today with House Speaker Nancy Pelosi in the hopes of scoring yet more emergency state aid, the NYT reports. Evidently, a carrot dangled yesterday by the Energy Department—the chance to qualify for $25 billion worth of low-interest loans to build energy-efficient cars—is not enough, the newspaper adds. According to the Detroit Free Press, GM is due to report tomorrow that it is in such a perilous state that the firm and its domestic rivals need a full-fledged bailout to survive. For GM, lobbying for state aid has even put crisis merger talks with Chrysler on hold, the paper adds.

Prospects don't look that much brighter for Toyota. On Thursday, Toyota, now the world's biggest auto seller, reported a 69 percent drop in net profits and cut its full-year outlook on weak demand and a strong yen, the WSJ writes.

In an effort to stem the number of foreclosures and prop up wobbly lenders, the Treasury Department is looking to loosen terms of the $700 billion Troubled Asset Relief Program, or TARP, to bolster financial institutions and restore the credit markets, the WSJ reports. The Treasury made its case in a report delivered to Congress on Election Day. While it argues for bolder action, the Treasury doesn't say exactly what it would do on policy, other than "to continue efforts to ensure loan modifications are sustainable." Even with the government's largess, Wall Street pay is expected to plummet. "Bonuses, which soared to record heights in recent years, could drop by 20 to 35 percent across the industry, according to a private study to be released on Thursday. Bonuses for top executives could plunge by 70 percent," the NYT calculates. The WSJ's estimate—a drop in Wall Street bonuses of between 20 and 50 percent—is only slightly more comforting.

And finally, how about some upbeat news, courtesy of IBM? The tech giant's CEO, Samuel J. Palmisano, reckons the answer to getting the economy out of its funk is a massive public-private investment scheme to build more efficient systems for utility grids, traffic management, food distribution, water conservation, and health care, the NYT writes. Call it a tech-fueled New Deal. Palmisano is expected to deliver his pitch in Washington today to the Council on Foreign Relations. The NYT adds, "Mr. Palmisano's speech never mentions IBM." With a wink, it writes, "IBM is increasingly playing the role of lead contractor in these so-called smart infrastructure projects around the world."