Economic Update: Back to the Table with Bailout TalksA quick update on economic events since Monday morning ...
After the $700 billion bailout bill didn't pass in the House, the blame game began with finger-pointing and political posturing from both parties. Without much room to maneuver, the Senate will attempt to salvage the $700 billion financial-rescue package when it reconvenes on Thursday. Behind the scenes meetings haven't yielded much progress on Tuesday.
After the vote results were announced, the US stock markets took a tremendous hit and plunged to close with a -777.85 point drop. It was the biggest one-day point drop in the 102-year history of the Dow, and the biggest percentage decline since trading resumed after the 9/11 attacks. Analysts estimate more than $1.5 trillion in equity was lost in the stock market losses on Monday.
Banks that are exposed to the money market funds also saw significant losses in Monday's free fall. Because of the financial crisis, some money market mutual funds have fallen below $1 a share. Money market mutual funds invest in short-term securities, a vehicle billed by most experts as being among the safer investments.
On Tuesday morning President Bush and both presidential candidates urged Congress to work out issues around the bailout bill and get it passed. Domestic stock markets jumped back up 200 points after the opening, but with the economy in distress and short term lending slowed as lenders hold cash back, gains are expected to be measured.
More banks are rumored to be troubled, including National City in Cleveland, although its stock rebounded in Tuesday's opening. Analysts say banks heavy with mortgage-related investments in the depressed areas of California and Florida are also on the watch list.