Stock Market Gets Hammered

September 15,2008
Saint Paul, Minnesota

Today the Stock Market had its biggest one day drop since right after 9/11. The cause for this fall was said to be the largest bankruptcy filing in history, that of Lehman Brothers. The filing is connected to risky financial investments, the housing collapse and other bad investments.

The S&P said it would cut its rating on mortgage lender Washington Mutual to JUNK status...their shares fell 27% during trading and another 11% in extended hours trading. Hewlett-Packard said it would cut 24,600 jobs or about 7.5% of its entire workforce. And Merrill Lynch was forced to sell itself to rival Bank of America.

Art Hogan, chief market strategist for Jefferies & Co., stated that the magnitude of the financial industry fallout is unprecedented, and could only be compared to the Great Depression of the 1930s or the railroad bankruptcies of the 1800s.

"We've never witnessed this before, there's no road map for this." said Hogan.

Even though this mess was largely created by greedy banks and ignorant borrowers, the net result has been that the government will step in to bail out Fannie and Freddy at Tax Payer expense and maybe even others. Treasury Secretary Henry Paulson said that he hasn't ruled out additional government bailouts for the future.

This is a Wall Street issue that will impact Main Street, no question. Consumer confidence is low, inflation is rising and many companies have either laid off people or put a freeze on hiring and lenders are not loaning to anyone without very good credit.

Billions of dollars were lost as banks and other financial institutions staked a risky bet on risky mortgages. Many got rich during the boom of the late 90's and early 2000's, including homeowners who cashed out on their equity quickly as banks came calling with low interest rates. "Pay off your credit cards and deduct the interest on the new loan." It sounded good and it was, except for many of these people their homes are now worth less than they owe on them.

With many Americans a pay check away from financial disaster, it was only a matter of time until our out of control spending caught up to us. Sadly, the national debt continued to rise at the same time and so now an entire generation will be strapped with a monumental debt and politicians who are unwilling to speak about, let alone address fixing the problem.

Whether Barack Obama or John McCain wins, expect more economic trouble ahead because the financial problems of America and its consumer addicted society will NOT be fixed by a President.

An interesting article.
http://money.cnn.com/2008/09/14/news/companies/lehman_workers.fortune/index.htm?postversion=2008091507