Blood On Wall Street As Bailout Plan Fails

Stocks sold off aggressively today after the $700 billion financial bailout plan failed to gain approval in the U.S. House. The Dow fell 778 points today, or 7%, its largest one-day point loss in history. The S&P 500 sank 8.8%, the most since the 1987 crash. The Nasdaq fell over 9%, crashing below the 2000 point level.

The bailout plan would have given the U.S. Treasury the power to buy troubled mortgages and like-securities from financial institutions in an effort to free them up to start lending again to avoid a financial catastrophe.

The massive credit crisis added more casualties today with Wachovia (NYSE: WB) agreeing to a FDIC-assisted fire-sale to Citigroup (NYSE: C); shares of WB fell 82% today. In addition, more problems surfaced in Europe with the governments of Belgium, Luxembourg and the Netherlands rescuing Dutch-Belgian bank Fortis NV and the UK nationalizing troubled mortgage lender Bradford & Bingley.

Today's failure of Wachovia and last week's collapse of WaMu (NYSE: WM) has investors looking for the next causality and eyes turned to Sovereign Bancorp (NYSE: SOV) and National City (NYSE: NCC) today, with the stocks sinking 72% and 63%, respectively, even after they commented publicly that they are well capitalized. It should be noted that neither Wachovia or WaMu was on the FDIC's list of 117 problems banks at the end of June.

Showing more signs of global trouble, the MSCI World Index, which measures the markets of 23 developed countries, fell 6.9%, the most in 22 years.

Showing the level of investor anxiety, the VIX, often called the Fear Index, closed up 26% to 46.92, its highest close since 2002.

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