Investors

Although the formal unveiling is still a couple of weeks away, the broad outlines of President Obama's long-delayed plan for reviving the nation's financial system are coming clear: an ambitious but untested attempt to partner up private capital with government funds while limiting the risk to taxpayers.

Attempts to place blame for the great financial crisis that sent the economy into a nose dive last year have made household names of top executives such as Angelo R. Mozilo, Richard Fuld and Maurice "Hank" Greenberg. But the only major criminal case to emerge thus far from the global cataclysm involves two lesser-known hedge fund managers who will be thrust into the spotlight today when their trial begins with jury selection in a Brooklyn courtroom. Federal prosecutors allege that former Bear Stearns Cos. fund managers Ralph Cioffi and Matthew Tannin -- in a frantic, eventually unsuccessful scramble in mid-2007 to keep their mortgage bond funds from collapsing -- misled investors about the deepening woes in the portfolios.

An informal market is springing up online for the IOUs that cash-strapped California began issuing last week, attracting the attention of regulators and state officials. Meanwhile, the state's bonds moved a step closer to "junk" status because of the budget mess that has prompted the state to pay tax refunds and other obligations with the vouchers. Would-be buyers of the scrip, officially called registered warrants, have expressed their interest on Web marketplaces including Craigslist and EBay.

Stanley Chais, a Beverly Hills money manager and philanthropist who steered hundreds of millions of dollars into investments overseen by Bernard L. Madoff, has fallen ill, relocated to New York and wants to move lawsuits against him from state court to federal court in Los Angeles. Investors have filed at least three lawsuits against Chais, accusing him of failing to properly safeguard their money and of not disclosing that he was investing with the disgraced New York swindler.

Investors continued to bail out of Treasury securities Monday, particularly the shorter-term issues that Wall Street tends to regard as relatively safe plays. But they aren't safe when the market begins to believe that the Federal Reserve will start tightening credit -- which is the way more bond traders suddenly are leaning. The yield on the two-year T-note soared to 1.39%, up from 1.3% on Friday and 0.94% on Thursday. That's a massive move in the space of two trading sessions.

Sticking with stocks was a good idea this year. Sticking with junk corporate bonds was an even better idea. The junk, or high-yield, market has rallied powerfully since the stock market bottomed on March 9. Bond prices have surged, driving yields down sharply. The average annualized yield on an index of 100 junk issues tracked by KDP Investment Advisors has plunged to 10.53% as of Friday, down from an 18-year high of 17.7% in December.

Dania Leon's portfolio has surged 55% during the stock market's booming rally over the six last months -- and she couldn't be more nervous. After suffering deep losses last year, the 41-year-old Pasadena resident is grateful to recoup some of her money. But she fears that stock prices have shot up far more than is warranted given the country's still-weak economy and nearly double-digit unemployment rate. "I'm scared, I'm scared, I'm scared," Leon said. "Why are we up, especially with unemployment as high as it is?

The Commodity Futures Trading Commission will consider new measures to curb speculation in the markets for energy and other commodities, the agency is expected to announce today. Such a move, designed to reduce the volatility of prices, faces resistance from top Wall Street firms, which fear the effort could cut into their earnings. Regulators and lawmakers have expressed concern that these firms have used their size and power to inflate commodity prices, booking profits in the process.

Wall Street on Wednesday closed out its worst year in more than seven decades, battered by a devastating credit crunch that smashed investor and consumer confidence and fueled fears of another Great Depression. The Dow Jones industrial average plummeted 34% for the year -- the steepest drop since the blue-chip index crashed 53% in 1931, the second full year of the Depression.

For bond funds, 2008 was spectacular. And disastrous. A 5.2% gain last year in a Barclays Capital index tracking the value of bonds of all kinds obscured the fact that performance in the fixed-income world was all over the map. Investors facing an unpredictable economy dumped corporate and municipal bonds -- as well as stocks -- in favor of the perceived safety of U.S. government securities, driving up their prices while driving down their yields.