President Obama has said that turning the economy around will not be easy, or quick -- and it appears Wall Street agrees. The Dow Jones Industrial Average lost nearly 90 points today and 800 points, or 9.7 percent, in the 10 days since the Obama administration announced major reforms to stimulate the economy, keep banks afloat and save millions of homeowners from foreclosure.
But since the banking reforms were unveiled Feb. 10, the Dow has reached a new bear market low -- the lowest since Oct. 9, 2002.
The series of announcements began last week as Treasury Secretary Geithner announced major reform to the banking system, infusing up to $2 trillion to rescue the nation's banks.
And, in Denver Tuesday, Obama signed the $787 billion stimulus plan into law, calling the legislation "the most sweeping economic recovery package in our history."
"Today does not mark the end of our economic troubles," Obama said at the Denver Museum of Nature and Science. "Nor does it constitute all of what we must do to turn our economy around. But it does mark the beginning of the end -- the beginning of what we need to ... set our economy on a firmer foundation, paving the way to long-term growth and prosperity."
Pushing ahead, the president unveiled a $275 billion mortgage rescue plan Wednesday designed to help up to 9 million homeowners stay in their homes and at least 3 million to avoid foreclosure.
Economists say that investors' message to the Obama administration was clear.
"Investors are not convinced that these programs are going to work, that they're going to be enough," said Alan Skrainka, chief investment strategist at Edward Jones. "In the meantime, the news in the economy has been very bad and they just don't see the light at the end of the tunnel."
Many investors are particularly worried about the so-called banking "stress tests," which is part of the Obama administration's plans to dive into the banks' books and see if they're worthy of major infusions of taxpayer money.
Many economists believe investors are concerned about what the Treasury will find.
"Many of these banks are holding on to ... assets that are very damaged," said Andrew Caplin, professor of economics at New York University. "If they were to really value the assets on their books, they could be declared insolvent."
Investors today traded on those fears. Bank of America closed at $3.93 a share, down from $42.67 last year. Citigroup proved dismal, closing at $2.51 -- down from $25.32 and reaching its lowest value in its history. American Express closed at $12.87, down from $44.55, reaching its lowest close since 1971.
At a panel discussion on the state of the financial crisis in New York, Wall Street titans J.C. Flowers, Hank Greenberg and Peter Peterson were bluntly asked how the economy spiraled into this mess. Peterson pointed to Wall Street managers.
"The corporate managers who took 'extraordinary risks' by leveraging companies too highly" are to blame, said Peterson, the co-founder of private equity investment giant Blackstone Group.
And it appears that leveraging at the banks is now what has investors most worried.