The AP reports on the failure of the bailout bill and the resulting 777 point drop in the Dow Jones Industrial Average (even while banks were being flooded with an extra $630 billion in liquidity from the Fed):

Stocks began falling even before the 228-205 vote to reject the bill was officially announced on the House floor. The 777-point decline for the day surpassed the 684-point drop on the first trading day after the Sept. 11, 2001, terror attacks.

Treasury Secretary Henry Paulson looked grim afterward, if not shaken. “We need to work as quickly as possible,” he said. “We need to get something done.” He went on: “We need to put something back together that works.” Looking to inject a note of confidence into a day of high anxiety, he offered: “Our banking system has been holding up very well, considering all of the pressures.”

We’re in uncharted territory at the moment. One of our questions about the Paulson plan to buy up to $700 billion in mortgage securities is whether that program would be effective, since the problems in the banking system actually go far deeper.

It was entirely appropriate for Paulson to be both “grim” and “shaken” at the outcome of the House vote. As a banker, he knows, and has seen first-hand in recent months, the horrible outcomes that are possible when panic meets high leverage. In one notable case, the US stock market took 25 years to recover from a problem whose consequences were mostly avoidable.

This entry was posted on Tuesday, September 30th, 2008 at 12:58 am and is filed under Democrats, General, Republicans, business. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.