Obama, Bernanke try to soothe amid global gloom

NEW-YORK. February 20. KAZINFORM The US president and the Federal Reserve chairman tried to persuade a skeptical public on Wednesday that steps taken to ease the credit and economic crisis will work, as the German government approved a law allowing it to nationalize banks.

Barack Obama's plan to help millions of homeowners avoid foreclosure failed to save US stocks from touching a bear market low, after European shares slipped and Asian markets hit a February bottom. Three top European banks said they were bracing for a tough year as concern grew over their exposure to Central and Eastern European markets, spurring the region's policymakers to consider new options to rescue their bruised banks and currencies. Meanwhile, regulators said they did not know the whereabouts of Allen Stanford, the Texas billionaire they charged with "massive" international fraud. Anxious people around the world rushed to try to get back their money, in person and by lawsuit, as the fallout spread from the United States and the Caribbean to Latin America and Europe; Kazinform refers to Today's Zaman. Obama's highly anticipated plan for the US housing market -- the epicenter of the global credit crisis and recession -- aims to keep as many as 9 million struggling families in their homes. Shortly after, the Fed's Ben Bernanke said the US central bank's policies are aimed at easing credit conditions broadly, but warned it was challenging for governments to manage banks for long periods -- appearing to argue against nationalization. The Fed also slashed its economic forecast for 2009 to a likely decline in output. "They are also quite pessimistic about the situation," said Ash Bangalore, economist at Northern Trust in Chicago. After a steep drop the day before, the Dow slipped below the Nov. 20 bear market closing low of 7,552.29 before paring losses and ending the day nearly flat at 7,555.63, 0.04 percent higher. The S&P 500 closed 0.10 percent lower. "The biggest problem in the market ... is a major lack of confidence and disappointment that the current administration really hasn't done anything yet about the toxic assets held by banks," said Al Goldman, chief market strategist at Wachovia Securities in St. Louis. The FTSEurofirst 300 index of top European shares closed slightly lower, partly on worries of new credit losses in Central Europe. Skepticism both at home and abroad greeted Obama's plan, which included up to $275 billion to help stem a rash of home foreclosures. Its details came after data showed US housing starts and building permits hit record lows in January. "It's another one of these things where just a huge sum of money is being thrown at various sectors of the economy," said Mike Lenhoff, chief strategist at UK-based Brewin Dolphin. Obama's foreclosure plan comes a day after the president signed a $787 billion economic stimulus bill -- the biggest initiative of its kind in US history -- intended to kick-start the world's biggest economy. Elsewhere, the head of the International Monetary Fund, Dominique Strauss-Kahn, told a Paris newspaper the fund may have to again lower its world growth forecasts, and that the global economy looked like it might stagnate this year. The German government moved a step closer to nationalizing mortgage lender Hypo Real Estate, overcoming free market qualms in the latest government intervention. The law approved by the German cabinet on Wednesday allows for the expropriation of share holdings. US private equity investor JC Flowers holds nearly a quarter of Hypo's shares. Other countries, including Britain and Ireland, have already seized control of banks, justifying their actions by pointing to the nature of the crisis and the need to protect taxpayers. But the latest welter of government intervention has done little to reassure financial markets. The US dollar neared a three-month high against the euro, which was hampered by concerns about euro zone banks with heavy exposure to weakening economies in Central and Eastern Europe. Central European governments on Wednesday considered interest rates, market intervention and bailouts, with Hungary -- whose currency slid to an all-time low against the euro on Tuesday -- proposing the former Communist region agree to a joint package to support banks.