Wall Street Sees Silver Lining

Wall Street has spotted a long-awaited silver lining in the treasury secretary's three-pronged plan to relieve banks of toxic assets, unveiled in detail yesterday. The Wall Street Journal, the New York Times, and Bloomberg zero in on positive jumps in domestic and worldwide indices, which saw hefty gains following the announcement of the Public-Private Investment Program. Bloomberg writes: "The S&P 500 gained 7.1 percent to 822.92, its biggest increase since Oct. 28. The Dow Jones Industrial Average jumped 497.48 points, or 6.8 percent, to a five-week high of 7,775.86. The MSCI World Index climbed for the ninth time in 10 days, adding 5.4 percent. Twenty-one stocks rose for each that fell on the New York Stock Exchange, the broadest rally since at least July 2004." Bank stocks fared particularly well on the news. Citigroup shares were up about 20 percent and Bank of America shares rose 26 percent.

Two related articles on the front page of the NYT take a look at what Wall Street's reaction means to Geithner's job security—it's good, no doubt—and on a more somber note, what kind of risks his plan carries for taxpayers. The paper also points out that not everyone in the financial sector was popping Champagne upon news of the plan. Few asset managers, arguably the most important players in the program, made public proclamations to participate in the auctions of legacy loans and securities.

The other major story in the papers this morning is that the majority of AIG executives who received the highest bonus payments have agreed to return their bonuses at the behest of New York State Attorney General Andrew Cuomo. The amount returned will total about $50 million, leaving $115 million or so left in bonus monies. Departing from statements made last week, Cuomo will not be releasing the names of the executives.

How the news will affect Geithner, who was criticized for not reporting his prior knowledge of the bonuses until much later, "remains to be seen," the WSJ says. "He is expected to testify before Congress on Tuesday, and the bonus controversy has ensnared him as he's tried to get his financial rescue plans off the ground."

CNN Money addresses the bonus issue, particularly the House-endorsed 90 percent bonus tax, this morning in an article titled "Bonus Tax: On Second Thought ..." "In a breathless run to smite those who took government funds and used them to enrich their own players, the House last week passed legislation that would have taxed the bonuses such that the recipients would in essence get to keep none of them," the site says. A similar measure co-sponsored by Senate Finance Committee Chairman Max Baucus is unlikely to pass in the Senate.

The general consensus in Washington is that the tax needs to be rethought. Geithner, whose mark is on almost every story today, told reporters, "We're going to look carefully at how this [bonus tax proposal] works through the Congress and try to make sure that we get this balance right."

Lastly, in a bit of sad news for newsmakers, Forbes reports that four regional newspapers in Michigan will be either cutting back on print days or going the way of the Seattle Post-Intelligencer—online-only. "The Ann Arbor News announced Monday it will publish its last edition in July and replace it with an online product ... as three other newspapers owned by the Newhouse family's Advance Publications—the Flint Journal, the Saginaw News and the Bay City Times—announced they were cutting print publication to three days a week starting June 1."