Its good for the short term and bad for the long term. In general, governments are right in that a falling market hurts the mass majority since the mass majority are usually buyers of securities rather than speculative Sellers. This means that a falling market reduces the financial well being of the mass majority. Governments want to protect markets from falling to keep the mass majority from feeling "poorer" due to normal corrections and to maintain tax receipts (government's revenue). We have seen this in several government examples over the last few years and not one of them has turned out for the better and some we are waiting to see how it turns out.
Plenty of government spending is good for simply delaying or postponing the inevitable. Propping up housing simply delays the inevitable, giving loans to countries that are going to simply use the new loan to pay back older loans (to the same people that gave loans in the first place) is simply delaying the inevitable. Additionally, with so much government intervention, it makes it difficult to actually believe in a free market that is dictated by fear and greed and simply dictated by a central bank or legislation. It tends to have a negative effect on the market and cause for wild swings for no reason other than elimination of "government intervention risk."
One particularly bad idea was the notion that banks could borrow from the federal government at 0% and then buy securities at 4% from the same U.S. government. Sweet deal for the banks who then shore up their balance sheets to simply refrain from any lending while at the same time increase the mortgage default scenario due to an increase in loan qualification standards. If a quarter of all mortgages are underwater, and banks don't refinance notes that are underwater, then we will see more and more defaults as owners simply walk because they cannot get refinanced prior to a rate reset. In this case, the government has meddled in the financial system to support a banking system that clearly has no concern for the American people because they are getting free money from the U.S.
Governments need to simply stay out of the free market except for making sure there are no cheaters of the system. In general, a free market must be free to rise and fall and is the best way to eliminate "bubbles" and high prices since the best cure for high prices is coincidentally, high prices (since by their nature they should fall).
Is there any good government intervention? Absolutely, but intervention that attempts to support a market is bad in every conceivable way. Intervention on those who have been swindled, or cheated, or to correct a monopoly or other controlling entity is where the government needs to focus. Artificially supporting banks, economies, unions, parents, teachers, business men and everything else simply needs to be removed from the free market and in general the market will correct itself and probably much faster and a lot less costly.
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The market was sent lower but had a strong rally before heading into the weekend but not enough to lift the market for the week. Heavy short covering to get most players out before a central bank issued some proclamation had most professionals out prior to the bell.
