The Dow fell almost 450, losing 300 points in the last hour. The Nasdaq lost almost 109 while the S&P fell 57. Markets around the world also fell sharply.
The Financial Times described the day like this:
The panic in world credit markets reached historic intensity on Wednesday, prompting a flight to safety of the kind not seen since the second world war.
Barometers of financial stress hit record peaks across the world. Yields on short-term US Treasuries hit their lowest level since the London Blitz. Lending between banks in effect halted and investors scrambled to pull their funding from any institution or sector whose future had been called into doubt.
The Fed has spent more than $600 billion to bail out Bear Sterns, Fannie Mae, Freddie Mac and now A.I.G., but the problems in the financial system are just getting worse.
Washington Mutual is about to go belly-up and the government is trying to arrange for a buyer. So far nobody is biting because "No one knows what's in their books..."
Gee, that seems like a good reason to not buy WaMu.
In addition, the two remaining investment banks, Morgan Stanley and Goldman Sachs, have not been able to convince investors about their stability to weather the crisis. Goldman dropped 19% today and Morgan Stanley dropped 31%. Rumors swirl Morgan and Goldman will both be bought up soon.
And if you think your money is safe in a bank because it is backed by the FDIC, think again:
The Federal Deposit Insurance Corp., whose insurance fund has slipped below the minimum target level set by Congress, could be forced to tap tax dollars through a Treasury Department loan if Washington Mutual Inc., the nation's largest thrift, or another struggling rival fails, economists and industry analysts said Tuesday.
Additional failures of large banks or savings and loans companies seem likely, and that could overwhelm the FDIC's insurance fund, said Brian Bethune, U.S. economist at consulting firm Global Insight.
"We've got a ... retail bank run forming in this country," said Christopher Whalen, senior vice president and managing director of Institutional Risk Analytics.
The financial system is facing the worst crisis since World War II, but at least Preznut McCain will put together a 9/11-type commission to study the problem.
That should fix things.