The fact that the Paulson bailout is somewhat similar to an FDIC bailout, except that the Paulson plan preserves existing bank structures and bails out their stock and bondholders in many cases, has stock market implications. First, there should be no large positive effect on non-financial stocks. The market already knows about these bad loans and the fact that bailouts of some sort lie ahead. The market actually rallied on the news, but has since given back most of those gains, although futures at this moment suggest a strong opening tomorrow. That rally was partly driven by short-sales being covered. … Continue reading Stock market implications