No matter where you look today, money is an issue. Investors don’t want to invest because of volatility risk and sellers are everywhere. Fear is still spreading on Wall Street and it looks like it’s not going to go away any time soon. Just today, a major credit rating agency said it was considering downgrading General Motors Corp. The sale came after S&P Ratings Services put GM and its financial affiliate GMAC LLC under review to see if their rating should be downgraded.

Just a few weeks ago, GM received a $25 billion bailout from the government as GM headed for bankruptcy. GM posted a net loss of $15.5 billion and announced plans to cut costs by $10 billion. JD Power and Associates and Global Insight lower expectations for the auto sector for 2008 and predict a slow recovery.

The government has responded again with news of buying stakes in banks. With this Treasury, capital can be injected directly into each bank in exchange for a stake in a bank. Under the $700 billion plan, the Treasury Department would get common or preferred shares of the bank.

With this injection directly to the banks, the banks could lend money and open and unfreeze their lines of credit as well. However, the $700 billion bailout plan allows the Treasury to deposit cash directly with banks; There hasn’t been much news about it lately. On the other hand, this would allow the banks to earn interest when the banks recover.

The Treasury Department can broker both deals, buy all the bad mortgages, and inject capital directly into the banks. Even if the Treasury injects a small percentage into US banks, it will most likely have a positive effect on the market. But there is no guarantee that even if the banks receive capital injected, they will lend again.

If new capital is provided to banks, in most cases the government guarantees the debt held by the bank. So that banks can pay existing debt holders. This will not make new loans if the banks have too much debt.

The Treasury has to make a new stipulation in a plan that all new capital injected will only be used to make new loans, not allow banks to pay off existing debt so that small and medium-sized businesses can continue operations and sustain the economy. launched by purchasing products/services. , hiring of personnel and, most importantly, loan of capital from banks.

There is still a wave of fear in the stock market and the bad credit market has investors selling instead of buying. Even the Fed stepped in and lowered its key interest rate to help unfreeze credit markets. With a reduced rate cut, this is supposed to be a boost for investors; however, the market responded in the opposite way. For homeowners who mean HELOC, ARM loans would be lower. If you receive an interest rate reduction on your credit cards, make sure you don’t carry too large a balance, otherwise; your low interest rate may change to a higher one. Keep your credit limit below 30% of your limit.

In Iceland, the government took over the top three banks as it continues to get worse. New emergency powers were enacted to allow the government to create a new bank to take over the internal operations of another of its failed banks. The decision should allow the economy in Iceland to return to normal operations.

Most investors were considering whether the plan to inject capital directly into banks would work and, if so, what effect it would have on the economy.