By Marshall Eckblad Of DOW JONES NEWSWIRES NEW YORK -(Dow Jones)- Shares in large banks and financial institutions rose Friday afternoon after the U.S. Treasury said it would consider insuring toxic assets at large firms from unlimited future losses, just as it did for Citigroup Inc. (C) in November.
Citigroup shares ended up 6.4% at $7.14. Shares in Morgan Stanley (MS), the securities firm-cum-bank holding company, rose 5.9% to $16.99.
Stocks of other large financial institutions rallied on the news as well. Shares in Goldman Sachs Group Inc. (GS), which, like Morgan Stanley, recently agreed to be regulated as a bank, closed up 2.8% at $86.76, while Bank of America Corp. (BAC) shares finished 1.8% higher at $14.33.
Many investors have been urging the U.S. Treasury to model its future efforts to stabilize the financial system after its late-November rescue of Citigroup. In exchange for an upfront "premium" from Citi, the U.S. government agreed to absorb all future losses from more than $300 billion in troubled Citi assets.
On Friday, the Treasury released a report to Congress in which it laid out the framework for providing "systemically significant institutions" with a similar form of insurance against large future losses.
The report seemed to emphasize that the program, known as the Asset Guarantee Program, will be available, on a case-by-case basis, only to the largest and most important firms.
"It is not anticipated that the program will be made widely available," the report said, in contrast to the U.S. Treasury's program to recapitalize more than 200 banks of various sizes.
That move by the Treasury amounts to the government insuring large banks against unchecked future losses, which investors have said is more reassuring than the government merely recapitalizing troubled firms.
A spokesman for Citigroup said the firm declined to comment on the Treasury's announcement. A spokesperson for Morgan Stanley did not immediately return a request for comment.
-By Marshall Eckblad, Dow Jones Newswires; 201-938-4306; marshall.eckblad@dowjones.com
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Publié le 02 janvier 2009 Copyright © 2009 Dowjones