Financial thoughts

The World Bank, the European Bank for Reconstruction and Development and the European Investment Bank will provide up to 24.5 billion euros ($31 billion) to help central and east European banks and businesses cope with the global financial crisis.

“We have a special responsibility for the region and because it makes economic sense,” EBRD President Thomas Mirow said in a joint statement issued by the international organizations today in London. “For many years, the growing integration of Europe has been a source of prosperity and mutual benefit and we must not allow this process to be reversed.”

The EBRD will provide about 6 billion euros, the EIB about 11 billion euros and the World Bank about 7.5 billion euros, the statement said. The aid will take the form of equity and debt financing, credit lines and political risk insurance.

East European nations are struggling to refinance foreign- currency loans taken out by borrowers during years of prosperity through 2007, when economic growth averaged more than 5 percent. The International Monetary Fund, which has bailed out Latvia, Hungary, Serbia, Ukraine and Belarus, warned on Jan. 28 that bank losses may widen as “shocks are transmitted between mature and emerging-market banking systems.”

Currencies

The Polish zloty rose 0.5 percent, to 4.6843 against the euro at 9:36 a.m. in London, the Hungarian forint strengthened 1.2 percent, to 298.20 per euro. The Czech koruna was up 0.2 percent at 28.125 per euro and the Romanian leu was little changed at 4.2940.

The IMF welcomed the plan to assist east Europe.

“This initiative will help mitigate the effects of the financial crisis on credit flows in the region,” IMF Managing Director Dominique Strauss-Kahn said in a statement. “The joint efforts under this initiative will assist individual financial institutions and sectors, while IMF lending will continue to support countries at the macroeconomic level.”

The global credit crisis that has left banks with more than $2 trillion in losses and writedowns and triggered a simultaneous recession in the euro region, the U.S. and Japan, is taking its toll on emerging economies.

The region will have a recession this year as demand for exports collapses, the IMF said in January payday loans with no fax. The economies will shrink 0.4 percent, the IMF forecast. The slump combined with rising unemployment and falling currencies increases the risk of more borrowers defaulting on their loans.

EBRD Mission

The EBRD was created in 1991 to invest in former communist countries from the Balkans to Asia to help them transform their economies. The IFC is the World Bank’s private-sector lending arm and the EIB is the European Union’s lending vehicle.

The EBRD is investing a record 7 billion euros in central and east Europe this year to help the region weather the global economic crisis, compared with about 5.8 billion euros last year. Almost half of that amount will be used to help recapitalize the region’s banks, stung by the credit crunch to revive the flow of credit to companies, the lender said.

Moody’s Investors Service warned on Feb. 17 that Austrian, Swedish and other banks with subsidiaries in eastern Europe may face rating downgrades as economies in the region deteriorate.

Non-performing loans in the region rose to 8 percent from 5 percent through last year, and Standard & Poor’s has forecast they may top 25 percent on average, Nomura Holdings Inc. said in a Feb. 13 report.

Cheap Loans

As companies and consumers have sought cheap loans, denominated mainly in euros and Swiss francs, external liabilities reached about 100 percent of gross domestic product in Poland and the Czech Republic and almost twice the national output in Hungary, according to figures compiled by Nomura.

Euro-region banks’ exposure in central and east Europe totals $1.25 trillion.

A group of six banks, including Italy’s UniCredit SpA and Austria’s Raiffeisen International Bank Holding AG, have pressed the EU to organize financial aid for countries on its eastern fringes.

Austrian banks alone have lent 230 billion euros in the region, equal to about 80 percent of the country’s GDP, according to data compiled by the Bank for International Settlements.

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Former Bundesbank President Karl Otto Poehl said smaller members of the euro region are more likely to default on their debt obligations and would probably be rescued by Germany or the International Monetary Fund.

“The first will certainly be a small country, so that can be managed by the bigger countries or the IMF,” he said in an interview with Sky News. “I think there are countries in Europe which are considering the possibility to leave the eurozone. But this is practically not possible. It would be very expensive.”

Poehl’s comments are the latest to suggest Germany’s economic establishment has become more willing to help rescue fellow members of the euro region facing bankruptcy. That marks a reversal from years in which German policy makers argued the Maastricht Treaty forbid bailouts and reflects growing concern that a default in one country would spark a region-wide crisis.

A deepening recession and bank bailouts are straining the budgets of some countries, sending bond spreads to records and prompting speculation among some investors that individual nations could leave.

The spread between Italian and German bond yields today widened to the largest since 1997. The spreads on Irish, Portuguese and Greek bonds are close to the widest since before they adopted the euro, which was created a decade ago.

Finance Minister Peer Steinbrueck heralded the shift in German thinking when he said last week that some euro nations are “getting into difficulties” and that Europe’s biggest economy would show its “ability to act.”

Surging Rates

Poehl, 79, said the high cost of leaving the euro region may help ensure its survival. He also said that one country’s departure doesn’t necessarily mean the bloc as a whole would crumble.

“In the case that a country would leave the eurozone, the foreign exchange rate would go down significantly — 50 or 60 percent,” said Poehl, Bundesbank president between 1980 and 1991 payday loans for bad credit. “Interest rates would go sky high as the markets would lose confidence in the system” and “in the countries that can’t maintain their membership.”

European Central Bank President Jean-Claude Trichet last week tried to ease concerns about the euro region’s fiscal health, saying Feb. 20 there is no “weak link” in the bloc.

“I consider that speaking of any particular country as a weak link in the euro area is an error of judgment,” he said. Trichet said today in Dublin Ireland’s economy faces “severe challenges.”

‘Catastrophe’

Not all German experts would back a bailout. Former ECB Chief Economist Otmar Issing told Frankfurt Allgemeine Zeitung last week that saving a profligate member would be “catastrophic” and undermine the monetary union framework. Current ECB Executive Board member Juergen Stark calls the no- bailout rule an “important pillar on which the European Union was founded.”

Former International Monetary Fund Chief Economist Kenneth Rogoff today predicted the default risk may rise once central banks start to raise borrowing costs from record lows.

“Interest rates will rise in two to three years and countries like Italy may face rates of 11 percent again — will they be able to pay?” he said in a speech near Reykjavik today. “I can well imagine that if we don’t have a large sovereign default, we will see some large sovereigns on the brink of it.”

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Instead of calling his office, Dr. Elie Azrak’s cardiology patients can hop online to request prescription refills, check portions of their medical records or send questions about their conditions.

Dr. Azrak and his fellow physicians at St. Louis Cardiology Consultants opened the Web portal to a segment of patients late last month, part of a systemwide rollout of electronic medical records across SSM Health Care.

Within a few years, the interventional cardiologist expects to be trading e-mails with patients and possibly holding real-time Web chats.

"If we can use technology to communicate with our patients and make it easier, why not?" asked Azrak, who is also vice president of the St. Louis Metropolitan Medical Society. "I’m sure this is coming."

In fact, it’s already here.

Technological advances rapidly are changing the way patients and doctors communicate. Video-conferencing with other physicians, remote patient monitoring and e-mail already are standard tools for many physicians across the country.

One of the newest innovations, a platform that allows insurers to provide patients with real-time access to their doctors via webcam, launched in Hawaii in mid-January.

Proponents say "e-care" will help broaden access to health care, create savings for employer-sponsored health plans and help fight a growing shortage of physicians nationwide.

Others welcome technology but worry about reimbursement for e-care and the effectiveness of digital diagnoses.

"I don’t see tele-health as ever replacing a personal relationship and direct one-on-one contact with your physician," said Dr. Michael Wulfers, president of the Missouri Academy of Family Physicians. "I just don’t see how you’re going to be able to ever accurately do a physical exam over the Internet."

CONSULTATIONS ONLINE

Dr. Roy Schoenberg is working on that.

The Boston physician’s health tech company, American Well, has developed a secure communication platform that connects doctors and patients for real-time consultations.

American Well’s first customer, Hawaii’s Blue-Cross-Blue Shield licensee, took the system live on Jan. 15. Consumers access the service by logging on through the insurer’s website.

Patients can search for specific physicians or seek out specialists for 10-minute consultations through webcams or text chats. The sessions can be extended for a fee.

"Online care is a technology that allows us to extend the reach of the existing health care system so that it is much more available and in a way much more financially reachable," said Schoenberg, the company’s president and chief executive. "It has tremendous promise."

The company did not release preliminary utilization figures from Hawaii.

Doctors can search through a patient’s electronic medical records and write prescriptions. Health plan members pay $10 to access the platform. The uninsured or those on other plans pay $45 per session.

American Well receives transaction and licensing fees through its deal with the Hawaii Medical Service Association low interest rate personal loans. Only physicians licensed in Hawaii can provide care, and they’re covered under a blanket medical malpractice policy from AIG. Doctors are reimbursed automatically and electronically.

Schoenberg declined to discuss the company’s plans to expand outside of Hawaii. However, he said a number of health plans across the country are expected to implement the platform this year.

Of course, American Well doesn’t bill itself as a cure-all. Patients experiencing chest pains or flare-ups of complex conditions should head straight to an emergency room, Schoenberg said.

Some physicians, including Wulfers, have raised concern about the potential hazards. Doctors can’t feel a patient’s abdomen or conduct a cavity exam through the screen.

"It seems to be just another (idea) along with urgent care or minute clinics, which will in the end lead to more fragmentation of care … and lower quality of health care," said Wulfers, a longtime family physician in Cape Girardeau. "It seems to me like it’s a walk-in clinic over the Internet."

Still, many patients couldn’t take advantage of "virtual house calls" if this service was suddenly available everywhere.

Only about 11 percent of U.S. Internet users have webcams connected to home computers, according to a recent study conducted for the California Healthcare Foundation. Meanwhile, about 65 percent of adult Americans have broadband or dial-up service, providing access to e-mail and the Web, according to a recent study by the Pew Internet & American Life Project.

Despite skepticism of the virtual house call, Wulfers e-mails some patients, adding that "in the future, I could do a lot of things by e-mail."

A survey by the California Healthcare Foundation also found increased use of e-mail between physicians and patients in the Golden State: 13 percent of Californians using the Internet reported getting medical advice via e-mail in 2007, up from 8 percent in 2004.

Starting March 1, Mercy Medical Group in St. Louis will test an online pilot program that gives secure Web access to a select group of patients. The patients will be able see lab results, get information about X-rays and schedule appointments through an interactive calendar.

Patients can take a picture of a suspicious rash and send the image in an e-mail. Doctors can respond to an e-mail question about high cholesterol with links to health-related websites.

Mercy plans to offer the Web portal to all patients by January, said Dr. Thomas H. Hale, president and chief executive.

Excited about the possibilities of the "electronic stethoscope," as he called the Internet, Hale also sounded a note of caution.

"What we don’t want to do is to take that opportunity and say, ‘Everything we’ve done in the past we need to throw away,’" Hale said.

"It has to be a clinical tool in the (arsenal) of physicians and caregivers."

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WASHINGTON – President Barack Obama promised quick help for strapped Medicaid programs Monday, revealing his administration will release $15 billion this week to help governors meet payments to poor Americans.

Obama's summit at the White House, which was coming at the close of a three-day meeting of the country's governors, was the first such forum of his young presidency designed specifically to get at problems threatening the long-term fiscal health of the nation. It came as Obama gets ready to disclose ambitious plans to slash the federal deficit in half within four years.

Even before it began, some of its 130 invited White House conference participants cautioned against overinflated expectations.

"It can either be a nice press event. Or it can be a substantive event," said Republican Sen. Judd Gregg, whom Obama appointed as commerce secretary before the New Hampshire legislator balked. “History tells us it will be the first. We've had these meetings before. There's always a lot of people willing to point out the problem."

Yet, he said, there is seldom anyone willing to make the difficult decisions to solve those problems.

As the country's economy continues its downward spiral, Obama's advisers are keeping their focus on the broader fiscal troubles that have sent millions to unemployment rolls. Taken in context, the summit is but one part of the White House's larger approach to the coming weeks focused on Obama's priorities for a first term, including a state of the union-style address Tuesday.

That speech is not likely to include plans to deal with long-crumbling entitlement programs.

Obama's first order of business on the domestic front Monday was his East Room talk to the governors about the stimulus program – and an unmistakable warning to critics of the $787 billion plan.

And he took the opportunity, as well, to address concerns about the stimulus plan raised by a handful of Republican governors who have called the plan overly large and wasteful.

At issue is a proposed expansion of state unemployment benefits for part-time workers and others who where previously ineligible to receive the funding. Some Republican governors – several with an eye on the 2012 presidential contest including Mark Sanford of South Carolina and Bobby Jindal of Louisiana – say they may not accept that funding because it will require a tax increase on employers once the stimulus money runs out guaranteed unsecured personal loans.

Obama addressed that critique directly, and warned against allowing political considerations to cloud a discussion of the stimulus program.

"I think there are some very legitimate concerns on the part of some about the sustainability of expanding unemployment insurance. What hasn't been noted is that is $7 billion of a $787 billion program. And it's not even the majority of the expansion of unemployment insurance," Obama said.

He added, "If we agree on 90 per cent of this stuff, and we're spending all our time on television arguing about 1, 2, 3 per cent of the spending in this thing, and somehow it's being characterized in broad brush as wasteful spending, that starts sounding more like politics. And that's what right now we don't have time to do."

On the larger question of burgeoning deficits, Senate Republican Leader Mitch McConnell of Kentucky said that a solution exists in legislation written by Gregg and his Democratic counterpart on the Budget Committee, Sen. Kent Conrad of North Dakota.

Their measure would create a bipartisan commission to deal with Social Security, Medicare and Medicaid. The entitlement programs face eventual bankruptcy, although experts differ on how urgently each is threatened.

Many House Democrats, however, remain opposed to a commission, including Speaker Nancy Pelosi, who believes any changes should be addressed through congressional committees. Obama has been open to the idea – and many others – as a way to move toward a viable solution.

McConnell said any movement would be a step toward getting a handle on the unfunded liabilities.

Obama plans to cut the federal deficit in half by the end of his first term, mostly by scaling back Iraq war spending, raising taxes on the wealthiest and streamlining government. The goal is to halve the federal deficit to $533 billion by the time his first term ends in 2013.

He inherited a deficit of about $1.3 trillion from his predecessor, President George W. Bush.

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CHICAGO — The shock that accompanied the market meltdown last fall has been replaced by something else: a resignation that it may take months or even years for the stock market to recover.

The worst week for stocks since early October underscored a loss of hope that government actions to stabilize the economy and the markets will pay off any time soon. Closing at 7,366 Friday, the Dow Jones industrial average is now down 48 percent from its peak just 16 months ago.

Investors are showing their strong disappointment with federal rescue efforts after putting their faith in it for months, according to Art Hogan, chief market analyst at Jefferies & Co. in Boston.

"The fiscal stimulus is now being looked at through the clear eyes that it’s a longer-term, back end-loaded plan that will take years, not months, to start affecting the real economy," he said.
Financial advisers and planners are trying to stay in closer touch with nervous clients and revisiting whether their advice from last fall still holds true.

"Everybody wants to know where things are at and where is this going to bottom out," said Doug De Groote, managing director of United Wealth Management in Westlake Village, Calif. "They’re seeing that the (political) change has not brought any good news to their portfolio."

Those who are the most vulnerable, including older investors and those with the most riding on the market, are among the uneasiest.

Joseph Leonard, a financial planner and retirement specialist in Southport, N.C., says attendance at the financial planning meetings he organizes has tripled to 150 since the meltdown, with many clients keeping their money in cash.

"They’re scared," he said. "One guy told me, due to economic conditions, the light at the end of the tunnel has been shut off. They don’t see where that light is today."

Overall, however, the confusion and alarm that accompanied last fall’s selloff have ebbed, as reflected in the recent relative stability of the VIX, the Chicago Board Options Exchange’s volatility index. The VIX reflects investor sentiment about market volatility over the next 30 days and is often called Wall Street’s fear gauge. But those emotions have been replaced by weary uncertainty and still-substantial concern, based on input from numerous financial advisers.

David Twibell, president of wealth management for Colorado Capital Bank in Denver, senses from talking with people about the markets that most are worn out by the constant flow of negative news and poor stock performance low rate payday loans.

"During the current selloff, the feeling is more akin to resignation," he said.

So with the Dow Jones industrial average closer to 5,000 than 10,000 after falling 6 percent last week, what should people do?

The answer, as always, varies depending on people’s individual circumstances and tolerance for risk. Many investors, in any case, already have pulled back into more defensive positions, such as bonds and money-market funds, at their advisers’ urgings.

The goal is to try to find a balance between being overexposed to the stock market and underexposed to the point where you miss out on any rally and lock in your losses.

Avoiding rash decisions and overreaction also is considered key. Marc Freedman, a certified financial planner in Peabody, Mass., fired off an e-mail Friday aimed at reassuring clients who might be inclined to react emotionally.

"Try your very best to think rationally, and in our opinion remain optimistic," he wrote.

Staying optimistic can be hard, depending on whose market assessments you trust.

Well-known financial pessimist Peter Schiff, who was ahead of the pack with predictions that the economy and stock market would tank, said Friday that he saw the Dow going potentially as low as 4,000 or 5,000.

"If people are looking for a bottom, U.S. stocks are still very expensive," said Schiff, who heads Euro Pacific Capital, a brokerage in Darien, Conn. "This bear market is going to last a long time."

But before you head for the ledge, consider the glass-half-full outlook as well.

Hogan of Jeffries says all the money being pumped into the short-term havens of gold, money markets and Treasurys is a sure sign of pent-up demand for stocks once the outlook turns more promising, which many experts think could happen by the fourth quarter. He thinks stocks could shrug off their double-digit declines to start the year (16 percent for the Dow and 15 percent for the Standard & Poor’s 500 index so far) and still finish up for 2009.

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President Barack Obama opted against naming a “car czar,” instead asking Treasury Secretary Timothy Geithner and White House economic adviser Lawrence Summers to head a task force on revamping the U.S. auto industry, according to people familiar with the decision.

Ron Bloom, a United Steelworkers union adviser and former Lazard Ltd. vice president, will join administration members on the team, according to the two people, who declined to be named because the announcement hasn’t been made publicly.

The task force puts an end to reports Obama would recruit a well-known figure from outside to serve as the so-called car czar. The president was under pressure to say who would handle the issue before tomorrow, when General Motors Corp. and Chrysler LLC must give progress reports on plans to restructure as a condition of $17.4 billion in U.S. Treasury loans.

“It’s going to be something that’s going to require sacrifice not just from the auto workers, but also from creditors, from shareholders and the executives who run the company,” senior White House adviser David Axelrod said yesterday on NBC’s “Meet the Press.”

After Congress failed to approve a bailout for the automakers, former President George W. Bush’s administration authorized loans Dec. 19. That effectively made the Treasury secretary the car czar, with responsibility for making sure the companies meet deadlines and authority to revoke the loans.

Geithner will remain Obama’s official “designee” to oversee the restructuring. The Treasury secretary will have authority to recall the aid if the automakers fail to show they have a plan by March 31 to become profitable.

Cabinet Departments

Representatives from Cabinet departments and White House offices will serve on the Presidential Task Force on Autos along with Bloom, who was described by administration officials as an expert in restructuring who also has experience in manufacturing and in working with unions.

Absent from the administration’s team is Steven Rattner, co- founder of private-equity firm Quadrangle Group LLC in New York. He had been under consideration for the post of car czar, people familiar with the matter said last month.

Members of Congress, automakers and industry analysts have spent weeks discussing who might be chosen from outside Washington to serve as the car czar and what expertise that person should bring to the task paperless payday loans.

Democrats’ Letter

Five Senate Democrats, including Debbie Stabenow of Michigan, wrote a letter on Feb. 5 urging Obama to name an expert in manufacturing as part of a panel to help oversee the auto loans.

“This advisory group provides a tremendous opportunity to bring together our country’s greatest manufacturing leaders to help our domestic automakers create the vehicles and technology of the future,” the senators said in the letter.

Bloom, who will be a senior adviser at the Treasury, has experience with an issue at the heart of the restructuring — health-care costs. Bloom helped negotiate the Goodyear Tire & Rubber Co. health-care fund, union spokesman Wayne Ranick has said. In 2005, Bloom met with UAW officials who were then evaluating GM’s request for health-care concessions.

Terms of the Dec. 19 loan agreements require GM and Chrysler to persuade the United Auto Workers to accept half of scheduled payments into a union-run retiree health-care fund next year in equity instead of cash.

Airline Pilots

Bloom counseled airline pilots in the $4.9 billion employee buyout of UAL Corp., parent of United Airlines. That 1994 deal included wage and work-rule concessions in exchange for 55 percent of the company.

He also helped steelworkers negotiate an agreement with Goodyear in 2003. The deal preserved 85 percent of union jobs at 12 U.S. plants in exchange for agreements on productivity improvements, health-care cuts and other issues to save Goodyear at least $1.15 billion.

The Presidential Task Force on Autos will include officials from the Treasury, Labor, Transportation, Commerce and Energy departments, as well as from the National Economic Council, the White House Office of Energy and Environment, the Council of Economic Advisers and the Environmental Protection Agency.

The industry’s preference for an overseer with a mastery of its workings and culture was voiced by Bill Ford, executive chairman of Ford Motor Co., on Jan. 11.

“It would be really helpful to have somebody in there who would take the time to have a deep understanding of our industry,” Ford said then at a dinner with reporters covering the Detroit auto show.

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Dealing with the fallout from the financial crisis — namely, the anxiety about your job and investments — is hard enough. Talking about it all with teenage kids can be even more daunting. But it’s a conversation worth having, especially now that they’re old enough to share the stress. Not only can you ease their concerns, says Atlanta psychologist Mary Gresham, "you can turn these into teaching moments."

Help them understand what’s going on. The last recession was in the early 2000s, meaning your children were probably too young to notice. This time they may grasp the severity of the situation even if they don’t entirely understand it.

Explain what’s happening — consumers are spending less, stocks are falling, companies are cutting jobs — and put it in perspective. Tell them that recessions occur regularly and that while this one may be especially severe, the economy will rebound.

Let them know how it’s affecting your family. The biggest question on your kids’ minds is probably: What does this mean to me? Answer this as straightforwardly as you can. "You don’t want to convey anxiety, just the facts," says Gresham, who specializes in financial issues. Start with what’s not at risk: their allowance, say, or your ability to pay the mortgage. (Whew! They won’t have to move and leave their friends.)

Then say what could be vulnerable: your job, for example, or your ability to cover all their college costs. Tell them exactly how you plan to cope. "You can’t just say, ‘We’re going to be okay,’ " says New York City psychologist Marlin Potash, who focuses on money and relationships. "You must explain why you’re going to be okay."

Involve them in decisions no credit check payday loans. With the 529s meant to cover his kids’ college education down 25% last year, Allentown, Pa. financial adviser Russell Wild knew he needed to stash more this year in the plans. He explained this to his children, ages 12 and 15, adding that the more the family could save now - by moving this year’s vacation from a European to a domestic destination, say - the less the kids might have to kick in for school later. With the issue framed that way, his son and daughter could see how the sacrifices they make now could benefit them later. Let your teens know about choices that affect them. Give them a chance to share their feelings and suggestions.

Make it a teaching moment. Even if your family hasn’t been hurt by the downturn, your teens can still learn valuable lessons. Kathy Stepp, a financial adviser in Overland Park, Kans., showed her kids articles about foreclosure victims to warn them about getting overextended.

"I want them to understand the concept of living within their means," she says, "and the potential consequences if they don’t." Use headlines about rising bankruptcy filings or news of a friend’s parent being laid off to underscore the importance of saving money. Says David, Barnett, a Tustin, Calif. financial adviser: "Times like these really help explain why you need that emergency fund."

Need help with a financial dilemma? In an upcoming issue, Money magazine will be answering reader questions. Email money_letters@moneymail.com.  

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Stocks broke a four-week losing streak last week on hopes that Washington’s stimulus package and revamped bank rescue plan will slow the pace of the 14-month old recession.

Any dashing of those hopes this week could send stocks right back down to their recent lows, with wary investors ready to bail if the rescue plans don’t go far enough. On Monday night, President Obama will hold a prime-time press conference to discuss his economic recovery initiatives.

On Tuesday, Treasury Secretary Tim Geithner is scheduled to reveal how the Obama administration plans to use the remaining $350 billion of the Treasury’s $700 billion Troubled Asset Relief Program (TARP).

Geithner was originally set to unveil the plan Monday, but the Treasury Department announced Sunday it was being postponed to allow Geithner to focus on the stimulus package being debated in Congress.

Investors are also keeping an eye on the Senate’s weeklong wrangling over the more than $900 billion economic stimulus plan after a different version earned party-line approval in the House of Representatives in the previous week. As of Friday night, negotiators on both sides of the aisle had reached a tentative agreement for a $780 billion package.

Congress is trying to meet its self-imposed deadline to pass the bill by the end of next week.

"It’s all about Washington right now," said Brett Hammond, Chief Investment Strategist at financial services firm TIAA-CREF. "These are such unusual times that we are looking to the government for stabilization."

"We need to see some sort of stimulus package that is of a significant size and that combines tax relief, short-term spending and long-term spending," he said.

As for the TARP, he said investors need to be confident that the program is going to successfully lubricate the financial markets, and by extension, the economy.

Geithner to goose markets: This week, TARP developments could have a bigger impact on the stock market than the stimulus. Even if the Senate approves the stimulus bill, lawmakers in the House and Senate will then need to reach an agreement on the final version.

Regardless, the market has been tethered to financial stocks this year - much like it was last year — and stocks will take their cues from the banking sector.

The broad stock market rallied on Friday despite a report showing the biggest monthly job losses in 34 years. Those gains were sparked by investor optimism about the government plans and a huge rally in the bank stocks, with the KBW Bank (BKW) index gaining 12% guaranteed payday loan.

On Tuesday, Geithner is expected to unveil the Obama administration’s plan to revive the banking system, including the overhaul of the controversial TARP program. Economists expect the government will need more than the $350 billion remaining funds to stabilize the banking system.

The new plan could include the creation of an aggregator bank or so-called "bad bank" that would sop up bad assets off bank balance sheets and ideally get the banks to start lending again.

Questions about how to value the assets have dogged the program from the beginning. One of the criticisms of the way the Bush administration handled the first half of the TARP is that the Treasury overpaid for the bad assets.

So as to address these concerns, the government could choose to suspend or alter the "mark-to-market" accounting rule, allowing the government to buy the toxic debt at a price that is below market rate, but not at fire sale prices.

"Whatever they end up doing, it’s going to help the economy, but it’s only going to be fair to the taxpayer if the government gets a fair price," said Len Blum, managing director at Westwood Capital.

For more details on what the new version of TARP might include, click here.

Economy

Tuesday: The government’s wholesale inventories report for December is due shortly after the start of trade. Inventories are expected to have fallen 0.7% after falling 0.6% in November.

Wednesday: The December trade gap is expected to have narrowed to $37.0 billion in December from $40.4 billion in November.

Thursday: The number of Americans filing new claims for unemployment is expected to have dipped to 610,000 from 626,000 last week, which was a 26-year low.

The Commerce Department reports its January retail sales index. Sales are expected to have fallen 0.3% after falling 2.7% in December. Sales excluding volatile autos are expected to have fallen 0.4% after falling 3.1% in the previous month.

Also Thursday, the government releases its business inventories report for December. Inventories are expected to have fallen 0.6% after falling 0.7% in November.

Friday: The University of Michigan’s consumer sentiment index for February is expected to have risen modestly to 61.5 from the previous month’s 61.2. 

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Is Bank of America literally destined to become THE Bank of America?

The Charlotte-based banking giant has already received $45 billion in taxpayer money. And the scary thing is that some think it may need even more to survive….possibly even an outright takeover by the government.

Shares tumbled nearly 18% early Thursday morning before bouncing back sharply later in the day and clawing into positive territory. Shares finished up 4%

But at one point Thursday, the stock was trading below $4 a share, its lowest point in more than 20 years.

That followed an 11% plunge Wednesday amid renewed speculation of nationalization.

BofA (BAC, Fortune 500) is struggling to digest the acquisitions of Merrill Lynch and mortgage lender Countrywide, and nothing it has done lately has given investors reason to be hopeful.

On Wednesday, BofA said that to cut costs it would sell three of its corporate jets and a helicopter it inherited in the Merrill deal.

Last week, the bank unveiled what it called its Lending and Investing Initiative, essentially a promise to track and report how it is using money from the government’s Troubled Asset Relief Program, or TARP.

But those moves have been rightfully ignored by investors as little more than attempts to boost the bank’s image.

BofA is hardly the only bank that has gotten whacked this week. Also getting hit were Citigroup (C, Fortune 500), JPMorgan Chase (JPM, Fortune 500) and Wells Fargo (WFC, Fortune 500).

That’s largely due to concerns that the Obama administration might not actually unveil a plan for a so-called "aggregator bank" to buy up the spoiled assets sitting on many banks’ balance sheets.

But BofA’s stock has been the worst performer by far in recent days. Simply put, the continued weakness in BofA’s shares is a sign that something drastic has to be done…stat.

Andrew Marquardt, an analyst with Fox-Pitt Kelton Cochran Caronia Waller, wrote in a research note Thursday morning that there needs to be "new leadership with a clear and consistent strategic plan to manage through the existing tough period."

"Inconsistency and poor vision at the helm has added to lack of conviction and confidence by investors and analysts," he added.

Is Lewis’ job safe?

So far, BofA CEO Ken Lewis has continued to have the backing of his company’s board of directors. But how much longer will that be the case? Former Merrill CEO John Thain has already lost his job. A spokesperson for Bank of America would not comment about the company’s stock price or Lewis’ status.

Some are calling for Lewis to go next. Jerry Finger, an investor who owns more than a million shares of BofA through his Houston-based firm Finger Interests, has said in various interviews that he would like to see Lewis step down.

Finger, who could not immediately be reached for comment, is leading a class-action lawsuit against the company. In the complaint, the plaintiffs allege that Lewis and Thain failed to protect shareholder interests when hammering out the BofA-Merrill deal make quick cash today.

But Lewis still has some fans. Richard Bove, an analyst with Ladenburg Thalmann, wrote in a report Thursday morning that "Ken Lewis may be the best operating manager of any bank in the United States."

Bove added that even though "investors believe that this bank is about to fail and be nationalized by the United States government," he thinks that "these fears simply make no sense whatsoever."

He pointed out that BofA, despite its fourth-quarter loss, is still cash-flow positive and that the bank reported a net increase in deposits of nearly $9 billion in the quarter.

Dan Genter, president and CEO of RNC Genter Capital Management, an investment firm in Los Angeles with about $2.7 billion in assets, added that bringing in a new CEO would not necessarily solve the bank’s problems. But he conceded that Lewis’ job could be in danger.

"I’m hoping they don’t make a change. But this is an atmosphere that’s punitive. The market is rewarding revenge to some degree," said Genter, whose firm owns a small stake in BofA.

And one hedge fund manager that used to own shares of BofA and Merrill Lynch last year said that he thinks Citigroup is in more trouble than BofA because of Citi’s bigger exposure to bad trading bets.

"Nobody really knows what’s on Bank of America’s balance sheet. But I think you have to draw a distinction between them and Citigroup," said Morris Mark, president of Mark Asset Group, a New York-based hedge fund firm.

Nonetheless, an analyst with one investment firm that sold its stake in BofA late last year said Lewis does deserve blame for taking on all the risks that came with trying to digest two sizable mergers in the face of a severe economic slump.

"Lewis could have weathered this downturn if it was just Bank of America and its assets, but now he’s got to deal with Countrywide and Merrill, whose problems I don’t think he fully understood," said Virge Trotter, a senior analyst with Manning & Napier Advisors, a money management firm based in Rochester, N.Y.

Trotter added that BofA arguably could have gotten better deals for both Countrywide and Merrill Lynch if they were allowed to collapse first.

He noted how JPMorgan Chase CEO Jamie Dimon waited until he got loan guarantees from the Federal Reserve before deciding to buy investment bank Bear Stearns. And JPMorgan Chase didn’t pounce on savings and loan Washington Mutual until after the savings and loan failed and was seized by the FDIC.

"Lewis is the captain of the ship so he has to take some responsibility. It seems that he paid full price last year and got too greedy," Trotter said.  

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Tennessee’s economy — and the nation’s — is in for a long, hard ride, according to University of Tennessee economists.

The annual report to Gov. Phil Bredesen comes from UT’s Center for Business and Economic Research. It says the state’s future is tied to the national economy, but it doesn’t see a bottom yet.

Things could swing either way, the report says, depending on the effects of the federal economic stimulus plan and whether banks will start extending credit again to consumers and businesses.

“If more financial institutions go under, the financial crisis could become more severe as the remaining banks try to fortify their balance sheets by holding reserves rather than lending,” the report states cash loans. “This would reduce both consumption and investment further than already anticipated, which would lead to larger job losses and higher unemployment.”

The report emphasizes education as a key to higher rates of employment and income. Since Tennessee spends less on average than other states, that doesn’t bode well for Tennessee, the economists say.

The state’s unemployment rate was 7.9 percent in December, compared with 7.2 percent across the country.

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