Stocks Surrender Gains, Lose Ground

Bill Stone, chief investment strategist for PNC Wealth Management, said that aid for asset-backed commercial paper is a continuation of recent efforts to unfreeze credit markets. By facilitating the securitization of asset-backed bonds, the government is encouraging additional lending for consumer purchases, he said. When lending is too tight, said Stone, "Even if the deals are good, it doesn't make any difference. Not many of us can pay in cash."

Stone said that the Fed's intervention is bullish for the markets, as it helps stocks price in a time frame for the length of a recession. "The longer the credit crunch goes on, the longer we have to assume the recession goes on," he said.

Hogan of Jefferies said that the government has made a good public-relations move by shifting its focus to the needs of the consumer. Intervention in the mortgage-backed securities market, credit cards, and student loans are all directed at the Main Street as opposed to Wall Street, he said.

As trading got underway, several financial firms appeared to be getting government help as well. Goldman Sachs (GS Quote) garnered strong interest in a government-backed issuance of $2 billion to $3 billion in bonds, according to a report by The Wall Street Journal. The sale is expected to conclude Tuesday, and Citi and General Electric (GE Quote) are expected to stage similar government-assisted bond sales.

Meanwhile, staggering insurance firm American International Group (AIG Quote) announced voluntary restrictions on executive compensation and said that CEO Edward Liddy would receive a base salary $1 a year for 2008 and 2009. AIG has received hundreds of billions of dollars in government investments and aid this year.