Big Rally On Wall Street On Hopes Of Paulson's RTC

Wow. What a day we had yesterday. Talk about a wide ranging day!

This morning, the futures are up massively. Considering the sell-offs we've had this week, what the heck is going on?

It appears that the world's central banks are injecting liquidity into the markets and the U.S. Government is going to bail out...every body?

The rally was sparked by news reports that Treasury Secretary Henry Paulson might set up a facility to take on bad debts from banks, bringing relief to a sector battered by the financial crisis.

The Paulson facility reportedly would be similar to the Resolution Trust Corp., set up in the late 1980s to take over failed assets during the S&L crisis. It would let ailing banks take bad debt off the books and free up money for loans and other transactions.

Some news reports said Paulson spent part of Thursday pitching the plan to Congress.

Other reports said the plan might not mirror the RTC, or that it was just one of many possible options.

Paulson made no public comment.

Whether such an initiative could make it into law is another matter. Earlier, White House Press Secretary Dana Perino questioned the wisdom of crafting sweeping measures in the midst of the crisis. She added it might be difficult to approve a bill quickly.

Well, Pauslon is scheduled to speak within the hour. This should be a very interesting day on Wall Street.

We have what appears to be a very credible rally, but it also seems to be based on stories of what may happen. It may also be magnified by further restrictions on short selling. Be cautious.

Christopher Smith
TheOptionClub.com