Congress reluctantly said yes to the $700-billion Emergency Economic Stabilization Act—EESA—and it was quickly signed into law by President George W. Bush. But the much-hoped-for stabilizing effects were offset by new European bank worries, prompting stock markets worldwide to sink yesterday. Credit remained frozen. California asked the Treasury for a $7-billion loan. Ohio, Massachusetts, Florida, and Nevada, are dipping into their rainy-day piggy banks to make ends meet. Officials in Jefferson County, Alabama, which includes the city of Birmingham, missed a $83.5-million interest payment on its $3.2 billion in debt, and reportedly has until October 8 to reach a restructuring agreement.
Not to worry too much, says the President’s Working Group on Financial Markets. EESA’s new mandates “will be employed in conjunction with existing authorities to restore market confidence by strengthening the balance sheets of financial intermediaries and improving overall market functioning,” according to a statement issued on Oct. 6. When? “In the coming days, Treasury will work with the Federal Reserve and their financial regulators to develop strategies that deploy these tools,” the working group promises.