2. September 29, 2008
House Rejects Bailout Plan -- Finger Pointing Ensues
Dow 10,365 (down 777 points); trading range, 872 points
The markets collapsed after the U.S. House of Representatives failed to pass the $700 billion Emergency Economic Stabilization Act. Considering the tight credit markets, most were expecting the measure to sail through Capitol Hill, but the bill's failure exacerbated fears that the economy would continue to suffer while the politicians tried to reach a solution.
Naturally, both political parties pointed the finger at the other to place blame for the measure's failure.
Continued tightness in the credit markets were reflected in the TED spread, the difference between what the banks charge each other for three-month loans (three-month LIBOR) and what the U.S. government pays for them (three-month T-bills). The spread was at its highest level since 1984, and indicated that banks were unwilling to lend to each other.
The selling on the Street was broad based, as the Dow, Nasdaq and S&P 500 fell 7.0%, 9.1% and 8.8%, respectively, settling at the session's lows. The Nasdaq and S&P 500's declines were the largest since Black Monday in 1987, while the Dow posted its worst day since the 9/11 attacks.
