Top 10 News Items 9/22-9/26: Markets Still Waiting for Deal on Bailout Plan; R.I.P. WaMu; Buffett Takes $5B Stake in Goldman

September 26, 2008 3:32 PM EDT

This is a recap of this week's major news on Wall Street:

1. Responding to some of the most jaw-dropping corporate failures in the history of Wall Street, President Bush's administration proposed a $700 billion program that would take toxic assets off of the balance sheets of ailing companies. The initial proposed plan would effectively clean-up balance sheets so that banks could begin lending normally soon. In its simplest form, the program aims at shaking up credit markets across the globe, which literally were frozen for much of this week. The plan, which many pundits say needs to be passed asap, is receiving much criticism from legislatures and Main Street alike. Investors are expecting the plan to be passed sometime this weekend, but many do not expect it to look the same as the initial plan created by Secretary Treasury Hank Paulson. The stock market bounced last week when rumors of a plan were heard, but sold off Monday, Tuesday and Wednesday as no deal on the plan was released.

2. Late Thursday night, the FDIC seized Washington Mutual's (NYSE: WM) assets, placing it receivership. Soon after, JPMorgan (NYSE: JPM) announced that it would acquire WaMu's assets and mark-down $31 billion, representing an estimate of the remaining credit losses on WaMu's impaired loans.

3. Goldman Sachs (NYSE: GS) sold Warren Buffett's Berkshire Hathaway (NYSE: BRK.A) about $5 billion in perpetual preferred stock Tuesday, marking the collaboration of possibly the two highest profile entities on Wall Street today. Buffett's preferred has a dividend of 10% and is callable at any time at a 10% premium. At the same time, Goldman raised another $5 billion in a common stock offering.

4. Goldman Sachs and Morgan Stanley (NYSE: MS), the largest remaining investment banks on Wall Street, announced that they would hang up their hats as i-banks and become bank holding companies. Amid some of the most intense weeks in Wall Street history, brave investors still involved in the market saw the end of an era.

5. Friday, Morgan Stanley confirmed that it entered into a letter of intent to pursue a strategic alliance with Mitsubishi UFJ Financial Group, Inc., Japan's largest banking group and the world's second largest bank holding company with $1.1 trillion in bank deposits. The letter of intent relates to an investment in Morgan Stanley that would eventually reach 20 percent of its equity on a fully diluted basis. The investment would be based on Morgan Stanley's book value as agreed upon completion of satisfactory due diligence. Upon the closing, a representative of MUFG will join the Morgan Stanley board.

6. GE (NYSE: GE) lowered its Q3 EPS guidance from $0.50-$0.54 to $0.43-$0.48 , citing the unprecedented weakness and volatility in the financial services markets. GE anticipates that difficult conditions in the financial services markets are not likely to improve in the near future, and as a result, is revising its earnings guidance for the FY from $22-$23 billion to $19.5-$21 billion . The company also suspended its buyback, but maintained their dividend. The stock gapped about 2% lower on the news, but finished the day about 4% higher.

7. Research In Motion (Nasdaq: RIMM) reported somewhat in-line Q2 earnings, but guided gross margins for Q3 well below expectations. The handset maker sees Q3 margins falling from 51.7% in Q2 to 47% in Q3.

8. Despite data that showed that the amount of corporate buybacks in the S&P 500 fell in August, Hewlett-Packard (NYSE: HPQ), Microsoft (Nasdaq: MSFT) and Nike (NYSE: NKE) all announced massive buybacks this week. HP raised its buyback plan by $8 billion, Microsoft add $40 billion to its repurchase program and Nike announced a $5 billion buyback.

9. After financials surged at the end of last week's trading on news that the SEC would put a temporary ban on short selling many financial stocks, the sector continued declining drastically on very volatile trading this week. The XLF, the Financial Select Sector SPDR (AMEX: XLF) was down nearly 8% for the week. Morgan Stanley fell more than 6% during the week, Wachovia fell 51% and Bank of America (NYSE: BAC) ended the week down about 2.5%.

10. Numerous economic data points showed further reasons for investors to be concerned with the US economy: initial jobless claims for the week came in at 493,000, compared to the consensus of 450,000, durable goods orders for August came in at down 4.5%, compared to the consensus of down 1.9%, new home sales for August fell about 50,000 short of expectations and Friday, the University of Michigan consumer sentiment index cam in at 70.3, below the Street estimate of 70.8.

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• Henry Paulson
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• Morgan Stanley
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• University of Michigan Consumer Sentiment Index
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