Banks' problems not yet solved

Sweeping plans announced Friday to help cleanse many of the nation's banks and thrifts of bad loans and temporarily ban short sales of stock in hundreds of financial services companies should help support share prices.

But they don't mean loan losses will go away. Banks also can't return now to the loose lending practices that long goosed profits and share prices -- and which culminated in a housing and credit crisis with no clear end in sight.

"We don't know for sure how this is going to come out," said Robert Millen, who helps oversee $3 billion at Jensen Investment Management in Portland, Oregon. "You wouldn't want to rush into the sector. If valuations get ahead of themselves, then you probably should trim."

Jensen invests in one bank, Wells Fargo & Co.

U.S. Treasury Secretary Henry Paulson on Friday called for the government to spend hundreds of billions of dollars to help rescue financial companies from lethal mortgages and other toxic debt that have discombobulated markets and threatened to undermine the entire financial system.

A separate two-week ban on short-selling financial stocks, in which investors betting on a decline sell borrowed shares and repurchase them later, is intended to halt market distortions that to many seemed absurd.

Morgan Stanley shares, for example, this week fell as much 59 percent in the two days after that Wall Street investment bank posted quarterly results that easily topped forecasts.

WALKING WOUNDED

Banks worldwide have suffered more than $500 billion of write-downs and loan losses since the global credit crisis began more than a year ago.