Wall Street Sinks to Lowest Level in 12 Years

Feb. 23, 2009— -- Washington has been working overtime to reassure investors that it has the right plans to revive the economy and rescue the nation's banks.

But the numbers tell the story and Wall Street is not convinced. In the month since the Obama administration took office, the Dow Jones Industrial Average has dropped more than 10 percent.

Investors picked up Monday where they left off last week -- on a selling spree that sent the Dow down another 250 points to lows not seen in 12 years. The Nasdaq dropped 54 points.

"People are sort of looking at this market as one that we don't know when the bottom is going to be put in. So fear is really dictating trading right now," said Art Hogan, chief market strategist at Jeffries and Company.

Since Feb. 10 -- the day the Obama administration announced its plan for supporting the banking system -- stocks have lost nearly 14 percent of their value.

Investors are skeptical that the administration's plans will be the right fix for the ravaged financial system.

Even though the Obama administration continues to stress support in the private banking system, one of the greatest fears on Wall Street is what will become of the country's biggest banks. Will things get so bad that they will have to be nationalized and taken over by the government?

"The fact that the government needs to take over a bank, it's just devastating to what the banking industry is about," said Patrick Casey at W.J. Blum & Sons.

The Treasury Department said Monday that starting Wednesday it will begin subjecting about 20 of the nation's largest banks to "stress tests." Any bank that cannot prove it has enough cash to weather an even more serious downturn may face the prospect of direct ownership by the government.