09/29/08 a day that will go down in history as Black Monday (the second)
Stunning Defeat for Bailout Plan Torpedoes Stocks; Dow Sinks Over 750
In a stunning vote that shocked the capital and worldwide markets, the House on Monday defeated a $700 billion emergency rescue for the nation’s financial system, ignoring urgent warnings from President Bush and congressional leaders of both parties that the economy could nosedive without it. Stocks were battered with the S&P 500 posting its biggest loss since 1987 and the Dow posting its largest ever one-day point loss!
Oil Plunges $10 as U.S. Bailout Plan Voted Down
Oil prices plunged as much as $10 a barrel Monday as a U.S. financial bailout plan failed to win legislative approval, increasing fears of a prolonged economic downturn that could sharply curtail energy demand.
Nasdaq 1,983.73 -199.61 -9.14%
Dow 10,365.45 -777.68 -6.98%
S&P 500 1,106.42 -106.59 -8.79%
NYSE Volume 6,896,981,000
Nasdaq Volume 2,808,100,250
Vix 47.26 +12.52 +36.04%
S&P 100 522.43 -42.69 -7.55%
Tommorrows holiday historically has translated into a low volume day, not sure that will be the case with Tuesdays trading session. There are financial companies unwinding positions as fast as they can right now.
Citi (C) To Fire 15,000 In Wachovia (WB) Deal
Must see - http://www.occ.treas.gov/ftp/release/2008-115a.pdf
The failure of the bailout package in Congress literally dropped jaws on Wall Street and triggered a historic selloff — including a terrifying decline of nearly 500 points in mere minutes as the vote took place, the closest thing to panic the stock market has seen in years.
The Dow Jones industrial average lost 777 points Monday, its biggest single-day fall ever, easily beating the 684 points it lost on the first day of trading after the Sept. 11, 2001, terrorist attacks.
As uncertainty gripped investors, the credit markets, which provide the day-to-day lending that powers business in the United States, froze up even further.
At the New York Stock Exchange, traders watched with faces tense and mouths agape as TV screens showed the House vote rejecting the Bush administration’s $700 billion plan to buy up bad debt and shore up the financial industry.
Activity on the trading floor became frenetic as the “sell” orders blew in. The selling was so intense that just 162 stocks on the Big Board rose, while 3,073 dropped.
The Dow Jones Wilshire 5000 Composite Index recorded a paper loss of $1 trillion across the market for the day, a first.
The Dow industrials, which were down 210 points at 1:30 p.m. EDT, nose-dived as traders on Wall Street and investors across the country saw “no” votes piling up on live TV feeds of the House vote.
By 1:45 p.m., the decline was 292 points. Then the bottom fell out. Within five minutes, the index was down about 700 points as it became clear the bill was doomed.
The Treasury would have been permitted to spend $250 billion to buy banks’ risky assets, giving them a much-needed cash infusion. There also would be another $100 billion for use at the president’s discretion and a final $350 billion if Congress signs off.
But Wall Street found further reason for worry overseas. Three European governments agreed to a $16.4 billion bailout for Fortis NV, Belgium’s largest retail bank, and the British government said it was nationalizing mortgage lender Bradford & Bingley, which has a $91 billion mortgage and loan portfolio. It was the latest sign that the credit crisis has spread beyond the U.S.
The Federal Reserve will pump an additional $630 billion into the global financial system, flooding banks with cash to alleviate the worst banking crisis since the Great Depression.
The Fed increased its existing currency swaps with foreign central banks by $330 billion to $620 billion to make more dollars available worldwide. The Term Auction Facility, the Fed’s emergency loan program, will expand by $300 billion to $450 billion. The European Central Bank, the Bank of England and the Bank of Japan are among the participating authorities.
Black Monday, Oct 19, 1987, 508 points and 22.6% in DJIA.
Today was the Second Black Monday…
Are money market funds still safe?
On Sept. 16, we got the disturbing news that one of the nation’s oldest money market funds “broke the buck,” or allowed its share price to dip below $1. The $65 billion Reserve Primary Fund held $785 million in short-term obligations from Lehman Bros., which has filed for bankruptcy, making those investments worthless.
This is a big deal because money markets have been touted as super-safe places to park your cash. In the past, mutual fund companies rushed to inject their own money if the value of their investments dropped far enough to threaten the sacred $1-a-share mark.
If you’ve got cash in a money market fund that you’ll need within the next couple of years and you’re concerned, you can consider transferring it to an FDIC-insured bank. Just pay attention to the FDIC insurance limits — typically $100,000 per depositor per bank.
Germany’s Dumbest Bank: Sends $250 Million To Lehman Minutes Before Bankruptcy (LEH)
As the problems surrounding Lehman Brothers (LEH) grew ever more apparent, most of Lehman’s counterparties stopped doing business with the company. But government-owned German bank KfW Bankengruppe is in hot water for approving an automated transfer of 300 million euros ($426 million) to Lehman just as the U.S. I-bank was going bankrupt. NYT:
The $426 million payment, described by the bank, KfW Bankengruppe, as an “automated transfer,” provoked an outcry across the political spectrum. The largest-circulation German newspaper, Bild, splashed a headline across its front page Thursday calling KfW “Germany’s dumbest bank.”
The bank’s administrative board, made up of politicians and business leaders, met in Berlin amid calls for dismissals and resignations.
Two of the bank’s managing directors and the head of the risk-control department were suspended, the economy minister, Michael Glos, who heads the board, announced after the meeting.
The German finance minister, Peer Steinbrück, said of the suspensions, “That’s not the final word.”
The transfer was part of an automated currency swap which management (somehow) neglected to cancel. The German lender is hoping to get at least some of its money back, though its not clear how much.
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