Bailout Rejected - Dow Drops 777 Points
- The MSCI World Index dropped 6% in one day, the most since its creation in 1970.
- Brazil's Bovespa was halted after dropping 10%.
- The London FTSE dropped 15%.
- Gold soared to over $900 an ounce.
- Oil dropped to $95 a barrel.
The meltdown has been caused by banks who are afraid to purchase more bad debt from each other by lending to each other. They are also afraid to disclose their bad debt, because it would lead to a downgrade in their debt rating, which would then lead to a decline in their stock price. This would then lead to their inability to raise capital, resulting in bankruptcy. This fear of disclosure has led to an overall panic, fed by rumor, which has locked up the credit markets.
Without credit market functioning, businesses will not be able to get the capital they need to run their day-to-day business. This could ultimately lead to a shut-down of businesses. Furthermore, it also means no credit for people to buy homes, cars, furniture and consumer electronics.
It is expected that the U.S. Congress will develop a bailout package by the end of the week to reverse this trend. Until then, expect global markets to continue their decline.
This snafu has further damaged the credibility of the U.S. political process throughout the rest of the world. If the bailout passes, it will increase U.S. debt to almost $11 trillion. Both hamper the ability of the U.S. to remain the premier financial center for the global economy. (Source: Bloomberg, Fed Pumps $630 Billion into Financial System, September 29, 2008; Stocks Plunge After Congress Rejects Bailout, September 29, 2008; CNNMoney, Bank bailouts sweep Europe, September 29, 2008)
Comments
Damn it!!! You mean McCain dropped everything and rode his white horse into Washington for nothing!!!!
Pelosi can go back to being a ‘housewife’…and Reed can go back to being a spoiled ‘mama’s boy’…Bernie Frank can go to jail without a ‘get-out-of-jail-free’ card….along with Chris Dodd, Barack Obama and every other ‘me-first’ politician that has been having a free ride ‘on the Magic Carpet’ of the AMERICAN PEOPLE’S SWEAT! ! !
This is off topic a bit but I really want people to know this. Bush created a $20,000,000 golden parachute for himself. I don’t know why there is no dialogue about it. It seems to me that it is one thing we might be able to stop. I for one don’t want him to get away with it.
That’s funny, when we are in default of our loans whether by loss of a loved one, job loss, or layoffs, where is our bailout? Why is no one coming to our rescue? Instead of helping us out by lowering some of the rates that they charge us, they just foreclose on our homes, and repossess our cars. That’s why there is such a big crisis. They can’t sell all of those homes and cars that they have taken back from us! And they are concerned about their debt rating? What a joke!
this financial crisis had its roots in the Clinton administration when the then President wanted every American to own his/her own home. Nice pie in the sky thinking! The Bush Administration was asleep at the wheel prior too and because of the Fanny Mae, etc bailout which gave others the idea that government could solve all the financial problems the greedy money brokers had to face. Senator Obama belongs to a grassroots group called ACORN. This group reportedly is involved with voter fraud. John McCain came to Washington recently because he is a US Senator from Arizona. We are a free people and our destiny’s are in our own hands. If you don’t ahve the money for a good down payment don’t purchase a house or lease a expensive car and stop bying electronic, adult toys. end of story. Joan
Having a big down payment on anything doesn’t help when a loved one loses a job or even his/her life, especially if the one who dies is one who helped bring in a second income. What’s so wrong with having the opportunity to own something of your own! Are certain races or classes of people the only ones entitled to own a home or a car?