Published: October 09, 2008 05:32 pm            

8,579: The slide continues — Despite the bailout plan, Wall Street selloffs plunge market below 9,000

Bailout. Rescue plan. Recovery package. Whatever you call it, Congress last week feverishly approved, and President Bush quickly signed into law, an intervention of taxpayer money designed to stabilize the volitility of Wall Street.

After black Monday of September 29, when the market took a 777-point tumble, the slide was temporarily derailed for a few days, but the slow decline to 10,000 continued.

The on Thursday, devastation: The Dow Jones Industrial average plunged another 678 points in a massive selloff, closing below 9,000 to 8,579.

Where are the brakes?

The Federal Reserve continues to throw billions into the banking system to stabilize the credit markets. This week the Fed participated in an unprecedented global rate cut: An orchestrated cut in interest rates with 20 other nations in an attempt to encourage financial institutions to borrow from their central banks and begin making loans to credit-starved businesses.

And the U.S. Treasury said it would begin to tap the $700 billion in bailout money to buy ownership shares in willing banks. The theory is that banks wouldn’t be so afraid to make loans if the government is in partnership with them.

The Fed also cut its key interest rate to 1.5 percent. (That rate was as high as 5.25 percent just two years ago, and it’s hard to believe that just this spring the Fed was more worried about inflation rather than the deflating economy we have this fall.)

And Washington is expecting some kind of gesture out of the G-7 finance ministers who will be in the capital this weekend for the annual meeting of the World Bank and International Monetary Fund and a visit with Bush.

Back in March, the Fed offered $400 billion in loans to the mortgage market; it pledged $200 billion to prop up Fannie Mae and Freddie Mac; it guaranteed $29 billion to underwrite the sale of investment bank Bear Stearns; it put $85 billion into insurer AIG; and it offered $50 billion to help out money market funds.

And then there’s the $700 billion in bailout money.

Despite the Fed’s persistence and imagination, still the bad news continues.

The IMF said the U.S. economic slowdown would last years, not months, and that our all-but-certain recession would be the worst since 1982.

If shoveling money at a problem works, we should, by all rights, be close to having this thing licked. But, as Thursday proved, don’t bet your 401k on it.

        

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