STEVE INSKEEP, host:
The bailout heads for a vote in the midst of more turmoil in the banking industry. Just this morning word came that Citigroup is buying most of the assets of the troubled banking firm Wachovia. The sale was announced this morning by the Federal Deposit Insurance Corporation which brokered the deal. NPR's Jim Zarroli is covering the story. Jim, good morning.
JIM ZARROLI: Good morning, Steve.
INSKEEP: Why now?
ZARROLI: Yeah, it seems like we can't get through another - a day without another big financial company kind of disappearing off the map these days. It's one - you know, Wachovia is one of the banks that have suffered big losses, $8.9 billion in the second quarter of 2008 alone. Its stock was down 74 percent this year. The CEO was fired.
You know, the problems apparently accelerated after Washington Mutual was seized by the government last week, and that really forced the situation. The FDIC felt like it had to step in. Treasury Secretary Henry Paulson says allowing the bank to fail would have meant systemic risk to the economy.
This comes right on top of the purchase of Washington Mutual by JPMorgan Chase because of mortgage losses. It comes in a month when we've seen the disappearance of all of the independent major investment banks. We're seeing just a real concentration of banking power in the hands of a few survivors, JPMorgan Chase, Citigroup, Wells Fargo, basically a few others.
INSKEEP: Well, this is also striking, Jim Zarroli, because it appears, depending on the vote in Congress of course, that help might be on the way. Hundreds of billions of dollars worth of help, but I guess you have Wachovia saying we can't or don't want to try to even hold out until that arrives.
Which raises another question. Does this bailout plan that will be voted on in Congress this week, go as far as Wall Street was hoping?
ZARROLI: Well, that remains to be seen. I think a lot of people on Wall Street, you know, have been watching the situation just spin out of control for months. They're so scared at this point that they're - you know, in a way just glad that Washington has been able to get together, and Congress and the White House have been able to agree on something.
You know, over and over again we've seen these situations where there are these crises. The Federal Reserve and the Treasury Department come up with solutions like the bailout of Bear Stearns or, you know, the acquisition of Fannie Mae and Freddie Mac, putting them in a conservatorship. You know, and sometimes we see the markets kind of calm down for a while.
But the bailouts, these actions never really do what they were supposed to do, which is calm down the markets, bring some confidence back to the economy. And so I think there's a lot of just inherent skepticism right now in the markets, and we will see how the markets respond today, but - you know. On the other hand, this plan is just of a whole other magnitude.
And I think people are hoping, you know, it's finally of the kind of scope and size that is needed to really do something serious here.
INSKEEP: Although Asian markets were down over night, and stock futures which tend to point the way to at least to the opening of the markets in New York, are also down this morning.
ZARROLI: Yeah, I think there's skepticism. I think that people again, are just wondering how big the problem is, and that's really the question all along, you know. How much of this bad debt is there out there, what's it really worth?
So how can you really be - how can you say, $700 billion sure seems like a lot of money, but there definitely are economists and analysts out there who say, you know, the problem's bigger than this, you know, it's not going to be enough.
INSKEEP: But what about the proponents, Treasury Secretary Henry Paulson and others? Are they saying $700 billion will be enough, or are they saying, gosh, we hope this works if you vote for it?
ZARROLI: I think Henry Paulson is, you know, and the Bush administration, and people in Congress who've done this, have done their best to try to put a number on this at a time when that's really difficult. You have to remember what these securities are, they're just - the troubled securities are pieces of the mortgages held by a lot of different people.
Some of them are going to fail. Some of them already have failed. So, we don't really know what they're worth, and we don't know what the potential losses are. And I think they've their best to try to put a number on it. But you know, there's a good chance that's - they have - you know, they haven't got it yet.
INSKEEP: Jim, thanks very much.
ZARROLI: You're welcome.
INSKEEP: NPR's Jim Zarroli is our guide through another tumultuous morning in the financial markets. What we know is that a bailout plan will be voted on at least by the House today, that markets are down in Asia, that futures are down in New York. And we'll bring you more news in a minute.
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