News reports are circulating that a plan is being worked on to put capital into beleaguered financial firms. Senator Charles Schumer was quoted by Bloomberg News as saying a “comprehensive solution” is being discussed.

Details are few, but the government could pump capital into beleaguered firms and/or create an entity to purchase bad debt.

Stocks have started rallying on the news, but until details are provided, it unclear how sustainable the current upward move is. Furthermore, the terms may not be friendly to shareholders in companies such as MBIA (MBI) or Washington Mutual (WM).

(Update: MBIA called to explicitedly state that they are not asking for a bailout.

I specifically mentioned MBIA because the rumored entity could help the company by purchasing the some of the bad debt assets tied to the securities MBIA ensures. Until actual facts are known, the risks of buying financial service stocks remains high.)

Read the analyst note on MBI

Read the analyst note on WM

“MBI” Free Stock Analysis: Buy? Sell? Hold?
“WM” Free Stock Analysis: Buy? Sell? Hold?
Zacks Investment Research

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