Commentary

Friday, October 3, 1:10pm EST

Today is the one month anniversary of the Federal takeover of Fannie and Freddie, but pardon me for not donning a pointy hat or hanging streamers. The Dow lost another 508 points today, a massive number that I’ve become numb to. So much for the bailout saving Wall Street–or Main Street. If you look at the numbers, it gets really depressing. On Sunday, September 7, 2008 the Federal government took over the troubled mortgage giants Fannie Mae and Freddie Mac. The following Monday saw a sell off in the stock market and triggered the domino effect of financial firms breaking apart and the onset of today’s financial crisis. During the past month government officials at all levels have said we are in a doomsday situation at the government must act to save us. We were told we were just a few trades away from a “crash” in mid-September. There were even record losses in single day trading. The Bailout was pitched as the “only” solution to stabilize our markets. Unfortunately, The Bailout hasn’t stabilized anything. In fact, in just the two and a half days since The Bailout was signed the whole stock market has lost more than in the entire month preceding it. Collectively, Wall Street lost an average of 8.6% between Sept. 7 and Oct. 3. But in the past four days, Wall Street has lost an average of 13%. On Friday, October 3, at 1:10pm all three major stock indexes hit their peak. None has looked back since. That was five minutes after the House started voting to pass The Bailout:

  • Between Sept. 8 and Oct. 3 the Dow Jones Industrial Average lost 7% of its value, 738 points. Since 1:10pm on Oct. 3 the Dow has dropped 1,325 points, 12% of its value. (11,510 to 10,772 to 9,447)
  • Between Sept. 8 and Oct. 3 the Nasdaq lost 10% of its value, 228 points. Since 1:10pm on Oct. 3 the Nasdaq has dropped 285 points, 14% of its value. (2,269 to 2,041 to 1,756)
  • Between Sept. 8 and Oct. 3 the S&P 500 Index lost 9% of its value, 115 points. Since 1:10pm on Oct. 3 the S&P has dropped 155 points, 13% of its value. (1,267 to 1,152 to 997)
  • The stock market may yet recover, but these numbers tell a frightening story of government failure and how trust in government action is mostly ill placed. Modern finance can not be regulated into submission to a great central plan. The government can ensure transparency and keep firms within the law. But giving them cash, telling investors they can’t short-sell, etc., etc., etc. doesn’t solve anything.