US Treasury Secretary Hank Paulson and Federal Reserve Chairman Ben Bernanke return to Capitol Hill Wednesday to defend their $700 billion financial-system bailout plan.
Analysts including Anthony Fry of Evercore Partners tell CNBC that swift passage of the plan is crucial to avoid "total carnage in the credit markets and potentially massive financial systemic risk."
But the same analysts agree that lawmakers must hold Paulson and Bernanke accountable by asking "the right questions" before handing them a gigantic blank check. And they acknowledge that the solution may be as daunting as the problem.
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Dr. Herbert London, president of the fiscally conservative think-tank Hudson Institute, underscored the difficulties of inserting public influence in the private sector:
"Where do you draw the line and say the Federal government can’t own Fannie Mae, Freddie Mac and AIG? It is quite extraordinary."
The Fed on Wednesday acts, for the second time within 24 hours, to keep the global financial system functioning. It coordinates currency swaps with central banks in Australia, Denmark, Norway and Sweden to supply money markets with $30 billion in funds.
The European Central Bank, the Bank of England, the Bank of Japan and Australia's central bank also infuse billions of dollars into their own banking systems to stop financial firms from hoarding cash.
Goldman Sachs Group sells $5 billion of common stock in a public offering on Wednesday, twice as much as originally planned. The day before, Warren Buffett's Berkshire Hathaway invested $5 billion in Goldman's preferred shares.
Goldman "is putting to rest doubts that a company could raise [money] without fundamentally needing it," Fox-Pitt Kelton analyst David Trone said in a note to clients. In morning trade, Goldman shares rise nearly 4 percent to $128.86 on the New York Stock Exchange.
With the exception of Goldman, financial stocks lose their brief Buffett-inspired gains. Tech stocks edge up. By the close, the three major U.S. indexes flatten out: The Dow sheds 29 points, or 0.3 percent, to close at 10825.17; the S&P 500loses 0.2 percent and the tech-heavy Nasdaq gains 0.1 percent.
What the Experts Were Saying:
Buy banks?! Dick Bove of Ladenburg Thalmann, Jack Bouroudjian of Capital Markets Technology and David Roche at Independent Strategy think some financial stocks are worth grabbing now.
Roelof van den Akker of ING Wholesale Banking predicts that the S&P 500 index will decline by up to 40 percent over the coming months.
Will the bailout plan include executive compensation limits? Charlie Gasparino has the details.