Wall Street drops at open
Dow down 300 points after European banks get bailed out and Citi buys Wachovia's banking assets.
NEW YORK (CNNMoney.com) -- Stocks skidded Monday morning - with the Dow industrials down more than 300 points - as investors eyed a series of bank failures in Europe and worried that the government's $700 billion bank bailout plan won't be sufficient to loosen up nearly frozen credit markets.
Investors also considered the Federal Deposit Insurance Corp.'s announcement that Citigroup will be Wachovia's banking assets. Meanwhile, credit markets remained jammed up with banks refusing to lend to each other. Treasury bond prices rallied, sending yields lower, as investors sought safety in government debt.
The FDIC announced that Citigroup (C, Fortune 500) was taking over Wachovia's (WB, Fortune 500) deposit network and debt, as well as more than $300 billion worth of the company's loan portfolio. The government brokered the deal, and the FDIC noted that Wachovia did not fail as a bank.
Wachovia's stock plunged 90% in pre-market trading to penny stock status and has of yet not opened for regular-hours trading. Citigroup gained 2% in the morning.
The House of Representatives was meeting to vote on the bailout Monday morning. The Senate is expected to vote on the plan on Wednesday.
Congress unveiled its long-awaited $700 billion bailout plan Sunday. The core of the bill is based on Treasury Secretary Henry Paulson's request to purchase troubled, and mortgage-related, assets from banks so they can resume lending, in order to free up the frozen credit market.
On Monday at the White House, President Bush once again announced his support for the bill "to help keep the crisis in our financial system from spreading throughout the economy" and he urged House members to support it as well.
Meanwhile, international markets were in turmoil after three major banking bailouts were announced in Europe.
The Dutch-Belgian bank and insurance giant Fortis failed and was provided with a $16.4 billion lifeline by the governments of Belgium, the Netherlands and Luxembourg. The British government nationalized the battered $91 billion mortgage lender Bradford & Bingley. Germany's regulators and banks bailed out Hypo Real Estate Holding AG, in a deal worth billions of dollars.
In the last session, on Friday, the Dow jumped more than 1%, but the Nasdaq slipped.
Economy: The Commerce Department said that personal income was up 0.5% in August but spending was unchanged. In July, income fell 0.7% and spending rose 0.2%.
Markets: The U.S. isn't the only nation to suffer from market malaise over the ongoing bailout plan. European markets were down in Monday trading, and the Asian markets closed lower. The dollar slipped versus the yen, but rose against the euro and the British pound. Oil prices fell $5.74 a barrel in electronic trading to $101.15, on concerns over the international market slowdown.