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Falling stock market pressures White House on banking fix

Dow's 100-point slide Friday stemmed in part from fears that banks would be nationalized.

By Staff writer of The Christian Science Monitor / February 20, 2009

Robert Gibbs, White House press secretary, said the administration believes 'a privately held banking system is the correct way to go.'

Ron Edmonds/AP

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Wall Street gave the Obama administration its own stress test this week.

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The Dow Jones Industrial Average closed down 100.28 points Friday, down 1.3 percent for the day and 7.2 percent for the week even as the White House was announcing its three-pronged approach to stabilizing the economy.

Investors' big worry: banks.

Citigroup under $2

Troubled Citigroup saw its share price fall more than 20 percent Friday to $1.95 per share. That's 's a whopping decline of 88 percent in value since fall 2007. A share of Citi used to be worth almost enough to rent a car for a day; now, it won't buy you a ride on the New York subway.

Bank of America's stock lost 3.6 percent of its value Friday, hitting lows not seen in more than 20 years.

The decline in bank stocks led the market downward to its lowest close since Oct. 9, 2002.

Nationalization?

Markets are nervous that the Obama administration will nationalize the banks . (For a look at the pros and cons, click here.) Stocks recovered somewhat after White House press secretary Robert Gibbs said that “a privately held banking system is the correct way to go."

Now, pressure is rising on the administration to reveal the details of how it will deal with banks' so-called "toxic assets," which are unresolved and continue to spook the market. So far, the White House has resisted nationalization.

But a widening array of economists are calling on Mr. Obama to take that step.

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