KEY POINTS:
To outsiders it must have seemed churlish that markets carried on panicking this week while the rest of the world stood still to watch Barack Obama make history.
The Dow Jones Industrial index had its worst Inauguration Day ever, dropping 4 per cent - a sizeable slump even
by the volatile standards we now live with daily. But the renewed burst of fear that engulfed Wall St as Obama spoke served as a timely reminder for those who still harbour doubts about the enormity of the crisis he is facing.
It was also a reminder that there is no room for sentimentality on trading room floors. Market movements are the sum total of millions of individual actions - actions taken with a very narrow focus.
The world may have invested a great deal of hope and emotion in the arrival of the new regime but serious investors seldom trade on either of those things. It seems safe to assume that nobody went out and bought shares this week just to commemorate the big day. Or if they did, they clearly didn't put their money in the banking sector.
It was banks that took the big hit on Inauguration Day - a worrying return to the bad old days of September and October last year.
Citigroup was down 20 per cent, Bank of America 29 per cent, State Street - the world's biggest institutional asset manager - down 59 per cent. It was a shocker.
As big losses are reported there is growing concern in financial circles that banks are still coming up short of the capital they need to resume operating normally. That's despite the hundreds of billions of dollars taxpayers have fed into the sector.
Across Europe, Britain and the US a second round of big taxpayer bailouts is on the way but the prospect has brought with it accusations that the banks are hoarding cash.
In theory interbank lending rates have fallen to relatively benign levels (at least compared with the credit-freezing spike in October). But in the US and Britain, at least, there is little evidence that credit is flowing through to the businesses that so desperately need it.
So Governments are starting to talk tougher, planning to attach more strings to future bailout money, and the prospect of nationalisation is being raised again.
In Australian and New Zealand our Governments have begun to talk about what happens if big companies can't raise enough cash on credit markets to service existing debt.
Australia is talking seriously about providing for the possible bailout of companies deemed too nationally important to let fall over.
In New Zealand this week John Key acknowledged the possible need for funds to bailout big businesses but he was not talking specifics.
If lending out of Northern Hemisphere financial institutions doesn't start to flow again then there could be some serious problems for some local companies.
But that is a big if. Thus far New Zealand companies seem to be doing OK rolling over debt. Fletcher Building had no trouble finding buyers for $100 million of capital notes this week. Infratil yesterday confirmed it had rolled over $520 million of debt for three more years.
Most of New Zealand's big businesses have good credit ratings and trade relatively boring, stable market sectors - which makes them quite sexy in the new low-risk, low-return environment.
There may be smaller local companies that hit difficulties this year and that will provide an interesting test of what this Government perceives to be worth saving. Just how many jobs would warrant taxpayer intervention?
Exactly how bad things are in the Northern Hemisphere banking system is still unclear but the renewed uncertainty has investors spooked for now.
As Obama and his team start to swing into action over the coming weeks more details will emerge about his economic rescue plans.
His great strength thus far has been his ability to appeal to the human spirit through his words - to encourage Americans and the rest of us to believe we can get through this.
As a circuit breaker that may help bolster consumer confidence which should in time flow through to the corporate world - great thing no doubt. But restoring confidence to the cold, hard world of financial markets will take clear and definitive action.
The next few weeks will provide a gruelling test of the new President's ability to make things happen.
