Robert was finishing up a late-breaking cartoon for tomorrow (combining the Friday night debates with the collapses in Washington and New York today), and he mentioned he’d heard that the Dow had its biggest one-day drop in history today.
I said nah — it was bad, but not that bad. He was right; I was wrong. Turns out that was the GOOD news. Other indexes did worse than the Dow.
Here’s the WSJ version. The NYT version sugarcoated it a little, saying it was the biggest drop "in two decades" (I haven’t checked their math). And here’s the AP version:
By TIM PARADIS – AP Business Writer
NEW YORK — Wall Street’s worst fears came to pass Monday, when the government’s financial rescue plan failed in Congress and stocks plunged precipitously – hurtling the Dow Jones industrials down nearly 7 percent. The almost 780-point decline was the largest one-day point drop ever for the index.The percentage declines for the Standard & Poor’s 500 and Nasdaq composite indexes were even larger. And credit markets, whose turmoil helped feed the stock market’s angst, froze up further amid the growing belief that the country is headed into a spreading credit and economic crisis.
Stunned traders on the floor of the New York Stock Exchange, their faces tense and mouths agape, watched on TV screens as the House voted down in midafternoon the administration’s $700 billion plan to buy up distressed mortgage securities. Activity on the floor became frenetic as the "sell" orders blew in.
The Dow told the story of the market’s despair. The blue chip index, dropped by hundreds of points in a matter of moments, and by the end of the day had passed by far its previous record for a one-day drop, 684.81, set in the first trading day after the Sept. 11, 2001, terror attacks.
The selling was so intense that just 162 stocks rose on the NYSE – and 3,073 dropped.
It takes an incredible amount of fear to set off such an intense reaction on Wall Street, and the worry now is that with the rescue plan’s fate uncertain, no one knows how the financial sector hobbled by hundreds of billions of dollars in bad mortgage bets will recover….
Nice going there, Washington. Nice leadership. Got any more tricks up your sleeves? You hammerheads…
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A lot of investors and common people will be forced to sell off good stocks to cover bad real estate investments, or raise cash for their businesses while credit has dried up.
A lot of people are getting out of everything and into cash and gold in cash Obama wins and goes on a tax craze, as he threatens to do.
–cue GOP fanboy with his tin hat–
What is totally amazing is whether or not the GOP had a valid point in not voting for the bill, you don’t go on national tv and say “she hurt my feelings, so screw the rest of the country. WAAAAAAAAH!! We don’t want to play anymore!!!”
How is that supposed to impress anybody and win over voters?
Rep Boehner needs to grow a sack and man-up. Even if they are right, they lost the public perception battle.
At the same time, McCain just got eunic’d as his story for the phony suspension of his campaign was that it was he and he alone who could bring in enough GOP votes to pass the bill. He was supposed to be riding in on his white stallion (leer jet) to save the day.
Instead McCain got hung out to dry by the House GOP and is a man with out an island…and no bridge to nowhere to help him back.
So McCain was either the cause of the GOP rebellion and failure to pass the bill and risk the damage to the economy or too weak a leader to get the job done.
What a disaster he and his campaign have become.
I am not a Republican, but the Democrats were hoping to mess up the economy because they thought it would help get them elected in November. Well, now they have messed it up, and we’ll see about November.
The public is figuring out that Democrats created these subprime mortgages for their bad-credit constituencies to buy houses. Now they are trying to sweep the crash under the rug to avoid hearings, where masterminds Barney Frank, Harry Reid, Chris Dodd, Joe Biden, John Spratt and Jim Clyburn have to explain all the money they took for officers of Lehman, AIG, Golden West, WaMu, Fannie Mae, and Freddie Mac, while defeating 18 efforts to bring regulatory reform.
Wouldn’t it be just as accurate to say that an unusual spirit of bipartisanship within the House existed to bring the bill down? After all, the 225 No votes had a closer balance of GOP and Democratic votes within that total than did the predominantly Democratic votes on the Yes side.
Couldn’t this be considered a triumph of bipartisanship, rather than a failure of same? Just asking.
You’re right, Phillip.
Here is are the votes:
http://clerk.house.gov/evs/2008/roll674.xml
This just in.
The Republican Bush Administration has just pumped $630 Billion dollars into the economy with out Congressional approval.
Nobody to blame but Bush for the spending on this one as it was a directive from teh Executive Branch and not a legislative action.
So much for the conservative, hands-off government and letting the markets decide.
Looks like the bail-out on the Hill was a total sham as Paulsen’s plan all along was to put $600 Billion plus into the economy totally at his discretion and with out tax payer review or approval.
How un-American & socialist is that? Hugo Chavez would be proud.
This will be a huge boom for the CEO’s & Hedge Fundies on Wall Street and whopping debt for Americans all thanks to the GOP administration.
Meanwhile, Bush just hung McCain out to dry while robbing the Federal Treasury at the same time.
Un-believable. Mission Accomplished.
“A lot of people are getting out of everything and into cash and gold in case Obama wins and goes on a tax craze, as he threatens to do.”
I was about to ask who would be stupid enough to do that because of who would be elected president… I mean, don’t they realize that at worst congress can completely change directions every two years and reverse them even if he did go bonkers.
Then I saw who put that post there.
Politics aside, there’s a load of anecdotal evidence — the kind of stuff that won’t show up in the stats for a month or more — that some folks are spooked enough to withdraw substantial amounts from banks and put them under the mattress despite FDIC insurance and the like. Even healthy banks are running short of funds to lend.
Credit, especially short-term credit mid- and small-size companies rely on for payroll and operating expenses, is drying up. Have you noted that several large car dealers have gone tango uniform lately? Credit for floorplan (finance for their inventory of cars) is evaporating. The big guys need to have a lot of cars on hand to have whatever suits the next customer who walks in.
The bailout bill ain’t gonna restore trust overnight, so even this optimist foresees some tough times, especially for the little guy, the small business, in virtually every sector.
Here’s a sober explanation of the stock market drop.
And Here’s a reason why I shouldn’t be too worried about the bailout’s failure.
Robert Rubin, Clinton’s Treasury Secretary, and Henry Paulson, the current one, are both Goldman Sachs guys. Does that skew their vision and outlook, direct them toward a worldview that emphasizes Wall Street over the overall health of the US economy? Some folks wonder.
BTW, I’m not implying any sort of conspiracy, just speculating that the bailout solution was crafted to target Wall Street health because that’s what these guys understand best.
As for the politics, only a woman could be so cruel: Pelosi = DeLay!
Ouch!
Does everyone have a short term memory problem? Remember back in June when most of the jokers in Congress voted for an “economic stimulus package” that gave everybody (including people who didn’t pay taxes) a “prebate check”?
Wasn’t that going to fix the economy?
And now you expect the brain trust in Washington to fix this mess that they created?
May as well hand your car keys to a guy with a dozen DUI’s.
Keep voting for the same people, folks! I’m sure they’ll get it right some day.
Apparenty, “just saying”, thinks another who takes their money out of the market while it is reacting in a volatile fashion to political chicanery, is “that stupid”.
The money managers who told me over the weekend that they were extracting their money are not stupid. One of them used to manage a $32 BILLION bond fund. Now he just manages his own money.
The ignorance of Obama, his antipathy to business, and his racial and class vitrol, do not instill confidence.
Obama is also fundamentally a dishonest poser. This mortgage crisis provides another example of that. Obama’s economic advisors include the top people who bankrupted Lehman Brothers, Fannie Mae and Freddie Mac.
Obama received $370,524(!!) from Lehman Bros, including $126,000 from Richard Fuld, CEO of Lehman Brothers.
In his short time in the US Senate, and as few time as he has shown up to vote, Obama has voted against oversight and reform of Fannie Mae and Freddie Mac every time.
60% of the boards of Fannie and Freddie are from the Clinton administration or Democratic Congressmen, most with no expertise in mortgates or finance. Their salaries average over $500,000, and their bonuses average over $700,000 – Jamie Gorelick, Louis Freeh, Rahm Emmanuel…
These bonuses were used to make larege contributions to Barney Frank, Chris Dodd, Joe Biden, Barak Obama, and Harry Reid.
These bonuses were based on FRAUD.
In June 2003, Freddie Mac dropped a bombshell: It had understated its profits over the previous three years by as much as $6.9 billion in an effort to smooth out earnings.
I’m certainly not defending our current set of leaders. Just wondering how much of it is law makers voting in fear of their constituents voting them out? That is, wasn’t a lot of the reason for the stimulus package being voted for that they had to “do something” to placate the voters (or so they thought). And how much of yesterday’s negative vote was by those in tough re-election races who were afraid to make a vote to support wall street because it might cost them?
Just Saying,
You are correct. According to information I saw, the number of Congress members who were considered to be in tight re-election campaigns voted about 4:1 against the bill.
I’m not sure it’s a bad thing to do what the people who you represent want.
FYI, one year ago today, the Dow was at 14,087. Almost a 30% drop since then.
Republicans and Democrats said their mail, e-mail and phone calls were over 90% against the bail out deal crafted in secret by Pelosi, Reid and Paulson.
Obama lied when he said “my reforms are in the bill.”
* The bill was a coverup, crafted by those who created the subprime mortgages: Barney Frank, Chris Dodd, John Spratt, and Nancy Pelosi.
* The mortgage markets only needed an insurance pool of $35 BILLION to stabilize, not a cash buyout of bad loans.
* Current executives at Fannie Mae, Freddie Mac, Lehman Brothers and AIG had their pay and bonuses protected. They caused the problem, were paid $400,000,000, and were big donors to Barney Frank, Chris Dodd, Joe Biden and Obama.
* Home owners in foreclosure got nothing.
Banks were guaranteed government making up any losses they took on foreclosures.
* Radical communitiy organizer groups like ACORN was supposed to get up to 20% of the “profits” from the bail out.
* The bill was larded up with money for student loans, and other spending.
* Democrats fought to keep loans in there for illegal aliens.
* The bill gave open-ended power for the federal government to buy up state retirement bonds, which was a way for states to assume the obligations of bankrupt union pension plans and pass them on to taxpayers. That amount is much larger than the money needed for the mortgage bailout.
There is plenty of blame to go around on this one. Sure Pelosi deserves much of the blame. Her very partisan admonishment of the GOP, though deserved to some degree, was way out of line during this crisis. There is plenty of time later to lay the blame at the feet of the GOP. Her timing was simply awful on this.
As for the Democrats in general they don’t need to push legislation that encourages home ownership for everyone, regardless of their ability to pay. That’s a formula for the mess we’re in now. People need to think before they borrow and the liberal factions within the Democratic party got carried away with all their zealous push for universal home ownership.
The hapless president is so weak right now it’s impossible to get on his case too much. But he’s brought this on himself with his mendacious approach to governing. The lies have finally caught up with him. No one believes anything he says any more, even most members of his own party.
But the real villans in all this are the GOP lawmakers who have controlled the reigns of government for too long. They are the ones who for 28 years now have pushed this “get the government off the backs of business” mantra to the point where it’s broken our economy. Regulation should not be a dirty word. We need it to prevent the excesses we see in business. Heck the so-called “guiding hand” of Adam Smith has developed a severe case of Parkinson’s Disease in recent years. To suggest the free market is self-correcting at this point is laughable. There is simply too much greed to allow this to contiune.
Sure we need liquidity in the markets to get us through. Certainly banks and homeowners alike should be provided an assist. But in the end we need to clean up the whole process and get back to real banking with sensible lending policies. And above all we need to remove this mindset that suggests regulation is always wrong.
People please get it right. The problem started back in 1977 under Jimmy Carter with the passage of a law to force banks to provide loans to low income people who could not afford houses to buy them anyway. These banks were threaten with law suites from the justice dept. if they did not comply. Later on Fannie Mae and Freedie Mac started buying up these bad loans and munipulating their books to reflect profits to the exact penny for bonuses to kick in for the heads of these instutions, resulting in millions of dollars in bonuses for these CEOS and mannagers at the tax payers expence. In 2004 the Republications said there were problems with these inst. that needed to be addresed and the Dems. Barney Franks being one of them said there were no problems and said no fix or investagation was needed. In 2005 John Mccain said there was a problem again the Dems. stood in the way of an investagation. Even George Bush said there needed to be better guidlines but was rebuffed by the Dems. There is enough blame to go around on both sides. But one, to have someone who helped cover up the problems in the first place[Barney Franks] two, to have someone who received the second largest donations from Fannie and Freddie [Cris Dodd] and and ex CEO of a failed inst. writting the bail-out, and this is a bail-out not a rescue plan is totally obscene.
The problem is, this bill didn’t stop the NINJA loans.
From 1992 to 2000, subprime loans grew from 2% of mortgages closed to 20%. That is tenfold, 10 times, a 900% increase in junk in the mortgage security portfolios.
Right now, 5% of the mortgages are in default, and most of those fall into 3 categories:
1. subprime loans created as social policy for minorities and even illegal aliens to buy homes with nothing down, no proof of income, no employment history.
2. geographical areas with huge developments with rapidly-escalating home prices, which collapsed, for various reasons, some just because they were overblown, the bubble topped out, or something external, like a GM plant closing in Minnesota.
3. speculators, either first-round investors, developers, builders and short-term speculators, or second-round speculators who bought troubled properties and then could not sell them in a falling market.
Non-owner speculators and investors comprise 60% of the mortgages in default.
In some markets, like California, 45% to 75% of those in default are held by second-round speculators who got caught.
Why should the taxpayers bail out speculators who made a bad guess on a risky deal?
Hey, I’ve got a great suggestion. Let’s ask Barney Frank and other dems to put the muscle on lending institutions to force them to loan money to unqualified borrowers. After that blows up and screws over honest investors, then they can craft a bailout plan that would give socialist Obama support organization ACORN a 20 BILLON dollar taxpayer cash injection.
Bottom line, the democratic party LOVES this mess that they helped create. They want to forever label Bush as the new Herbert Hoover and Obama the new FDR.
Brad,
Just a note on why some say this was the biggest one-day drop in history for the DOW, while the NYT (and others) says it’s the biggest since 9/11.
It is the biggest point drop in history, but it’s not the biggest percentage drop. It’s the biggest percentage drop since 9/11.
(It’s the 17th biggest percentage drop in history, according to http://www.baltimoresun.com/news/local/politics/bal-te.bz.markets30sep30,0,5661683.story).
If you were to listen to the media, then yesterday’s one day drop was the biggest drop in US History. In reality, how did the 777 point drop yesterday in the Dow compare to other large drops in history. While all you here is that it was the LARGEST one day fall in the dow in history, when you look at the percentages, it falls well short.
Top five worst day drops on the Dow in history
1. October 19, 1987: -22.
61%
2. October 28, 1929: -12.
82%
3. October 29, 1929: -11.
73%
4. November 6, 1929: -9.
92%
5. December 18, 1899: -8.
72%
17. September 29, 2008: -6.
98%
Top Five worst day drops on the Dow in modern times….
1. October 19, 1987: -22.
61%
2. October 26, 1987: -8.
04%
3. October 27, 1997: -7.
18% (BILL CLINTON WAS PRESIDENT)
4. September 17, 2001: -7.
13% (BILL CLINTON’S LAST YEAR IN OFFICE)
5. September 29, 2008: -6.
98%
Top 5 Dow drops in modern times:
1 & 2 were when Ronald Reagan was President; 3 was when Bill Clinton was President; 4 & 5 were when George W. Bush was President (unless my memories of September, 2001 are out of kilter).
Sept 11, 2001 belongs to Bill Clinton and those Democrats who blocked US Army Intelligence from taking down the hijacker cells they had discovered, and who prevented the USAF from killing Obama when they had him in their sights.
I am amazed at the lack of information everyone here seems to have. The economy has been in the toilet for a few years now. Easy credit does not a good economy make. All that free and easy lending is coming back to bite the banks in the butt because wages aren’t rising and unemployment is. that’s a direct result of tax CUTS and shipping jobs overseas.
To the person who is blaming the “crisis” on the dems – get a grip. They’ve had a ONE VOTE majority in Congress for all of a year and a half. The issues that brought us to this place have a lot more to do with no rules for the big boys on Wall Street. Banks lent to all kinds of people with bad credit, at the behest of your president. Most of the mortgage loans going bad now were made in 2003 and 2004, long before the dems were “in power”. So, the facts say you are wrong.
Democrats created this mess.
Banks lent to all kinds of people with bad credit, because legislation written and pushed by Democrats required banks to make a certain percentage of these bad loans to blacks and Latinos.
Subprime loans made up only 2% of loans in 1992, when Clinton took office. Threats by Janet Reno to prosecute banks who refused to make loans increased junk loans to 20% of all loans by the time Clinton left office.
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