Economy - Pork-Laden Financial Bailout

The Senate passed a new version of the financial industry bailout legislation. The House could hold another vote on the proposal as early as Friday.

The passage of the bill is a positive, though there were way too many unrelated amendments included in the legislation. For example, it provides tax credits for biodeisel and extends depreciation rules for restaurant improvements. There is a reason why this bill is 451 pages long.

The amendments were added to get additional votes. The question now is will the fiscal conservatives within the House balk now that the price tag of the bill has increased? News reports suggest voter anger following Monday's vote, so conventional wisdom suggests that the legislation will be passed, with probably an even higher price tag attached.

Bluntly put, do not expect a tax cut anytime soon.

Would I have preferred a "clean" bill without the extra amendments? Yes. But the Senate's bill does contain positives such as improved oversight, insurance for some debt and an increase in deposit insurance to $250,000 per bank account. The full text of the bill can be found on the Senate Banking Committee's web site.

http://banking.senate.gov/public/_files/latestversionAYO08C32_xml.pdf

From an investment standpoint, last night's vote does not change much over the short-term. The economy remains in a slump and many traders want to see what the House does.

Given this background, investors should continue to avoid the usual suspects such as homebuilders like Ryland Group (RYL), car companies such as Ford (F) and financial firms including Keycorp (KEY).

Source : zacks