Bailout bill fails as Dow falls

 

 

By Tim Paradis

NEW YORK – The failure of the bailout package in Congress literally dropped jaws on Wall Street and triggered a historic sell off – 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 lost on the first day of trading after the Sept. 11, 2001, terrorist attacks.

At the New York Stock Exchange, traders watched with tense faces 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 frantic, with selling 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 1:42 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 bailout not going through sends a signal that Congress isn’t willing to do their part,” remarked Gordon Charlop, managing director with Rosenblatt Securities.

While investors didn’t believe the plan was a cure-all, most market watchers saw it as a start toward setting the economy right and unlocking credit.

Analysts said the government needs to find a way to help restore confidence in the markets.

“It’s probably fair to say that we are not going to see any significant stability in the credit markets or the stock market until we see some sort of rescue package passed,” said Fred Dickson, director of retail research for D.A. Davidson & Co.

Democratic leaders said the House would reconvene Thursday in hopes of a quick vote on a revised bill.

“We need to put something back together that works,” Treasury Secretary Henry Paulson said. “We need it as soon as possible.”