- The Washington Times - Monday, September 29, 2008

Panic seized Wall Street this afternoon, with stocks, oil and other investments plummeting as the U.S. House of Representatives failed to pass a $700 billion bailout for the financial industry.

The Dow Jones Industrial Average nosedived as much as 705 points as House leaders held the vote open for several minutes in hopes of reversing the 228 to 205 vote against the compromise plan drafted by congressional leaders and the White House over the weekend.

The Dow recovered slightly and was down 555 points at 10,587 as of 2:30 p.m. All the major stock indexes registered major losses ranging from 4 percent to 6 percent. Investors piled into safe-haven Treasury securities and gold, pushing up their prices. But they liquidated stocks, oil futures and other investments in an attempt to raise cash to cover debts.

The apparent failure of the bailout came on a day of severe turmoil on Wall Street as banks and corporations scrambled to get loans and cash before a Sept. 30 deadline Tuesday for rolling over debts.

Markets were roiled from the opening of trading as the government announced a hastily arranged takeover of Wachovia Corp. by the megabank, Citigroup, to avert the failure of another titan of the banking industry.

The failure of several banks in Europe overnight added to the market rout, prompting the Federal Reserve and European banks to announce massive cash infusions of up to $620 billion into stressed money markets. Stock markets in Europe ended down over 5 percent.

“Investors may have freaked out,” said Rob Cox, analyst with Breakingviews.com. But he expressed hope that the administration will find other ways to rescue failing banks like it did in the case of Wachovia as well as Washington Mutual and American International Group earlier this month.