Wall Street Feels Bailout Burnout

Kenny Landgraf, president and founder of Kenjol Capital Management, said the increased FDIC protection will help alleviate the withdrawal of capital from financial institutions. After Wachovia (WB Quote) merged with JPMorgan Chase (JPM Quote) and Washington Mutual (WM Quote) failed, "the question is, who's next?" said Landgraf.

"We need to go some period of time without some financial institution failing or being taken over. Investors are scared; I've never seen this level of fear."

In other government actions, the Securities and Exchange Commission's ban on short-selling of certain stocks, including those of many financial firms, is set to expire Thursday. However, CNBC reported that the SEC is likely to leave the ban in place past its original expiration; although it was not immediately clear how much longer the agency would extend the deadline.

Wednesday also saw the beginning of a new government initiative to allow an estimated 400,000 homeowners to avoid foreclosure by trading their existing mortgages for loans that would be easier to pay. The optional program requires that homeowners take a loss on the original loan.

According to reports by The Wall Street Journal and Reuters, former AIG (AIG Quote) CEO Maurice Greenberg requested the opportunity to bid on the insurance company's assets. AIG, which has taken out an emergency bridge loan from the government as part of its effort to raise capital, was reportedly contemplating the sale of various assets to stave off a government takeover. AIG shares gained 19% to $3.95.

Elsewhere, Bloomberg reported that Swiss bank UBS (UBS Quote) may be cutting as many as 1,900 investment banking, equities and fixed-income jobs. UBS announced earlier this year that it would split its business after incurring large subprime-related writedowns. Shares climbed 8% to $18.95.