ORIGINAL COMMENT: This is the most significant event of the year, bar none. The party is over. This is a disaster similar to 1929's cultural and political earthquake. Besides electing Barack Obama, this series of events signals the end of the Gordon Gecko "Greed is Good" capitalism era. The "Masters of the Universe" will wind up as insurance salesmen or used car hustlers. Coupled with the nascent defeats in Afghanistan and Iraq, this is the end of the American empire. No more will we be able to ram "democracy" down the throats of peoples who don't want it or don't need it. Our scope will be much smaller.

UPDATED FEBRURARY 4, 2009. I found this Calvin and Hobbes cartoon strip from almost twenty years ago that tells it all.

By genghisthehun

Whoa! Chill out global warming and terrorism, we've got a even hotter potato to handle! The financial world is collapsing on our heads...Oupsi...Thanks to all hedge funds investors and to those who made their constructive work possible...We couldn't have done it without you!

Of course this brought Obama and the Democrats in power-I just hope they don't screw things up as bad as the GOP did.

37 Democrats and 33 Republicans on the House Financial Services Committee.  34 Democrats and 28 Republicans receive Campaign Donations from Fannie and Freddie.  Puts the Market into a Cedar Point roller coaster ride. 

Update
The only guy getting the axe for the Socialist Bailout is Fulmer from Tennessee.  I'm not even sure he had anything to do with the bailout.

If you are ignorant and like it that way....do NOT check out the Community Reinvestment Act of 1977 (Jimmy Carter) or the overturning of Glass-Stegall in 1999 (Bill Clinton). Do NOT look into the threats of lawsuits from the Clinton justice dept directed at lending institutions. Do NOT look into Obama's associations with Fannie and Freddie. Do NOT consider the irrefutable fact that this happened after the Dems took control of Congress. Nope....blame Bush. Hell, while your at it....blame Reagan too. Anyone for blaming Teddy Roosevelt & Eisenhower too? 

UPDATE: I am sick and tired of the outright lie....this mantra....that "deregulation" had anything to do with any of this. Any of you ever been a borker or loan officer? Owned your own business recently? Government regulations are overboard, and were from 2005 to 2007 when I was in that business. Go read all of the TIL laws and see how long it takes you to go blind.

This wasn't a melt down; it was market check...In hind sight though, if you wanted to see a real melt down, you should have been with me in my broker's office when I saw where the actual check was going.

  The house of cards built after deregulation has collapsed, but not before ripping off millions of working people for the benefit of sleazy corporate creeps. 

 Deregulation allowed (not forced) greedy lenders to make loans to people knowing full well they were going to have to foreclose and put these people out in the street (after milking them for every cent possible).

BTW, socialism for the rich is nothing new in the USA.

UPDATE (courtesy of Congressman Dennis Kucinich):

WRITE YOUR SENATORS AND CONGRESSIONAL REPRESENTATIVES AND DEMAND:

1. Reinstatement of the provisions of Glass-Steagall, which forbade speculation (artificially raise s the price of oil and gas in addition to supply and demand)

2. Re-regulation of the finance, insurance, and real estate industries.

3. Accountability on the part of those who took the companies down:

a) resignations of management

b) givebacks of executive compensation packages

c) limitations on executive compensation

d) admission by CEO's of what went wrong and how, prior to any government bailout

4. Demands for transparency

a) with respect to analyzing the transactions which took the companies down

10. A requirement that 2008 cycle candidates return political contributions to officers and representatives of corporations receiving bailouts And, most importantly, some mechanism for direct assistance to homeowners saddled with unreasonable or unmanageable mortgages, as well as protection for renters who have lived up to their obligation but fall victim to financial tragedy when the property they live in undergoes foreclosure. 

At least it wasn't the State Puff Marshmallow Man.

I must say that I fear for my country. Accorn may have been involved in the precipitation of the most serious economic crisis in decades, at short time before an election, with a frightening military deployment in the homeland, a complicit silence and apathy from the Bush administration, a deep polarization of the electorate... will there be elections? Will we get to experience the unimaginable: Martial Law and indefinite suspension of elections? Complicity of the world economies? One world currency? Cashless globalization? Redistribution of wealth? Suspension of Constitutional guarantees?... should I keep on? Update: today, Friday October 24, futures trading suspended.  
My advise: go out and get as much supplies as you can get. Better safe than sorry.

A "4" for right now, but a "5" for what I am afraid it will soon become.  It's not just the US; global markets are faltering along with ours, and feeble attempts to prop up what is left standing isn't doing much good as of yet.  

If I might use a crude simile, it's kind of like how Wile E. Coyote can walk off a cliff a few feet without falling:  We've been pretty screwed for a while now, it's just taken us a while to look down and realize it.

I would venture to guess that (coinciding with the recent financial fiasco) we have all heard the word trillion(s) over the last few weeks more than we have all of our lives. Why is that and what does it have to do with anything else? Lots.

With all of the attention on Fanny Mae and her brother, the fall of the Big Houses and the $800 billion dollar loan to Wall Street, something astronomically larger that the Enron scandal has been going on. It has been unregulated and closed to the general public, or anyone who can't cough up millions of dollars to buy-in. Its called "Credit Default Swaps" and has been protected by the Commodity Futures Modernization Act of 2000,a rider to spending bill H.R. 4577, which was signed into law by President Clinton, making it illegal to regulate these transactions. Rupert Murdoch has called them "Financial Weapon of Mass Destruction". This is where "the trillions" come to play and why this financial domino chain reaction has occurred.  Its scope is staggering and Lehman Brothers was the first big domino to fall.

"Somethings happened here and you dont know what it i-i-is, do yoooou, Mr. Jones?"

Here it is in its most simplified form. Credit Default Swaps are perceived as a kind of insurance, so well use this as an analogy:  Mr. Smith buys car insurance. His premiums are a fraction of what it would cost to replace his vehicle, should he total it. The reason an insurance company can do this is because they are hedging on the probability that not all of their insured will wreck their cars on the same day. Mr. Smith totals his car, but his misfortune will not affect the overall stability of the Company. But, what if other people were allowed to buy insurance on Mr. Smith's car? No limit. As many people who wanted to gamble on Mr. Smith's car would be able to. But, they picked the wrong car and when he crashed it, the insurance company was libel for $2 trillion in payouts. They couldn't pay, so they go to the US Government to cover the tab. The public sends emails and phone calls to Washington indicating, at a prolific rate, that they dont want the government to use taxpayer dollars to bail-out a firm that made bets that they couldnt cover.

Segue to the Financial District, where the Credit Default Swaps were being sold. It's hard to tell if someone had actually called Lehman Brothers out; whether this was really the result of history's most lop-sided P/E statement; whether this actually did dry-up credit; or whether the Federal Reserve artificially turned the screws on the flow of credit and caused panic in hopes of blackmailing the American People out of an arbitrary sum of $800 billion.

If the later scenario is the one...in which the Fed said that they will stop the credit flow to the bigger banks, who will, in turn, be forced to stop the credit flow...all the way down the line...UNLESS the US Government coughs up the Big Bucks, then what we have just witnessed was the most profound shift of power in the history of mankind and a coup d'état has occurred...all because someone convinced the government to convince us that they were smart and we were too stupid to understand this. The Credit Default Swaps are up in the $60+ trillion range.

Welcome to the United State of Goldman Sachs, Chairman Paulson, presiding.

wow what a possible solution today. the market is really finding ways to stay alive. the idea of temporarily halting FASB157 or mark to market ruling may help these banks temporarily.  these accounting rules are important but a temporary halting of the practice would enable banks to shore up thier balance sheets, "write up" the MBS inthier portfolio and enable for them to lend again. this coupled with the "invest in america plan" should provide plenty of firepower for us to weather thru this credit crisis. for some reason im starting to feel a little optomistic. i hope im not wrong.

This crisis is so nutty that even money market funds almost went into the crapper a couple of weeks ago. Those are essentially zero-risk sweep funds, not very different than what you have in your savings account, where you trade a lack of FDIC protection for maybe a percentage point of additional yield. Frightening. The government seems utterly unable to control the bleeding; unlike previous crises, the easy solution of cutting interest rates can't be done, because they can't decline any further. After Indymac, even the FDIC is apparently running out of cash. The market today apparently lost $1.1 trillion, more than the price of the so-called bailout. This is what happens when your executive has lost any sort of authority to deal with crises--whatever Bush touches seems destined to be rejected. Not to mention that the way that the government has arbitrarily rescued some banks and let others die hardly restores confidence to the system. This ranks among the biggest news stories of this generation, and will continue to haunt us for years even if we manage to dig our way out of it ... think about how drastically the tax revenue base has been destroyed this year; corporate and other capital losses this year alone may cut off the government from rebuilding our Third-World infrastructure, let alone promoting democracy around the world.

The fall of the Roman Empire? How can we learn from our mistakes if we live them forward? I wish we had more say. The government seems to be making some mighty important decisions about our lives without asking us to allow it to do so. I believe they still work for us, yes?

Democrats Covering up the Fannie Mae, Freddie Mac Scam that caused our Economic Crisis:

It's starting to get scary. And like it or not, it's going to affect every one of us in one way or another. The heat is on!

This worries me. I am not exactly an economics expert, but every day we hear stories of huge, impossibly rich companies going down the pan, kingpins falling from power and constant doom and gloom in the stock market. As this is perhaps only three years before I become financially independent, the fact that England is so dependent on a fast-slipping America concerns me, as our economy is likely to feel the same effects as theirs. If employment levels continue to plummet, how is this generation (whom we are frequently told is yobbish and incompetent) going to cope in a country devoid of inspiration, self-sufficiency and where the cost of living is knocking on Monaco's door?

Very important event. In fact, it might even be epochal in nature. The age of American hegemony in the world of finance seems to be coming to a close. Many Americans are asking themselves the same question: how did the economy get into such a bad spot? For years, many thought that the economy was booming, productivity and job growth was on the rise, and other indicators were generally pointing up. Yet in just a few short years, we are finding ourselves in the midst of one of the worst downturns since the Great Depression.

Eschew is absolutely correct here. Government intervention in the markets got us into this mess and now they are proposing more intervention to get us out it through massive bailouts of firms with huge portfolios of non-performing assets. Government sponsored enterprises like Fannie Mae and Freddie Mac were able to gain a monopoly position in the mortgage backed securities markets (where this crisis originally began) because the government, by statute and regulation, gave them an advantage! The issue though is not about having too little or too much regulation like the Presidential candidates are currently debating. The issue is how and what to regulate. Huge chunks of the financial system, including Money Market funds and Derivatives Trading went completely unregulated by SEC and other regulatory agencies due in part to the fact that Congress passed a law in 2001 expressly prohibiting regulation in those sub-sectors of the financial industry. More regulation is not the issue here; rather it is properly applying the rules to ensure a free and fair market.

That is the immediate cause of this crisis, but much of it is also systemic in nature and was likely a work in progress for some time. The Feds loose monetary policy during the Greenspan era lead to an unsustainable housing boom. They did it through the manipulation of interest rates. When rates are lowered to below what the market rate would actually be, as the Fed did numerous times in recent years, it becomes cheaper to borrow money. Capital intensive projects, mainly in real estate, became much cheaper to do with the lowering of interest rates. The boom came about because of an increase in the supply of money into the system, not out of consumer demand. The result of this latest asset bubble was the misallocation of resources into a specific market, namely real estate, where there wasnt enough demand. Real estate developers had overbuilt, and now had excessive demand in their hands. Prices began to adjust dramatically, as market players began to lower prices to adjust to the new market reality.

However the fall is very hard. A lot of big banks have a lot of devalued assets in their hands and now they want the government to buy those assets to get it out of their hands (and off their books). The latest trillion dollar bailout scheme coming out of the Treasury is the biggest Hail Mary pass in the history of American finance, and in my view, it is unlikely to work. Prices simply have to adjust to market values. Policymakers instead are trying to prevent the liquidation of bad debt and assets at market prices, theyre trying to prop up the market and keep those bad assets trading at prices far greater than anyone is willing to buy them for. The Feds and the Treasury Departments strategy simply doesnt make sense to me. We have to let all that systemic debt work out of the system. Ultimately, that will happen, with or without the bailout. The pressure on the financial is too excessive to be contained. There will be a lot of pain in the process, we may have to go through a period of austerity, lower government spending, devalued currency, weaker buying power, but ultimately the market will adjust, and thats when things will begin to improve. It may take a few years though.

Conservatives are correct when they point out that such bailouts represent the worst type of moral hazard. Were only increasing the likelihood that financial institutions will engage in risky investments because they know that if they overextend their financial position, the government will be there to bail them out should their assets become worthless, like now. The government is actually using trillions of dollars to buy short term security at the expense of long term financial instability. The bailout, which to me is a form of market socialism, a nationalization of a portion of the financial sectors, simply distorts the market more. Government intervention will only make the situation worse; indeed, misguided laws and regulatory policies lead to the situation we find ourselves in today. Until policymakers realize this, were in for a bumpy ride in the short term!

Time for some solid financial advice from numbah: canned food and shotguns. Think about it...

How are we rating this? To me my one star rating means I am terrified with what is going on. It is bad for everyone.

Thanks to idiots putting their trust in warmongering bluebloods and fat cats twice...twice!, this is a reality and not something that looks like a bad early Springsteen song title.

The "Wall Street Meltdown" is a sign of the United States falling back to the pack in the new global economy. Most Americans will still have things a whole lot better than others around the world, but the era of American economic superiority appears to be coming to a close. Unfortunately those most responsible for this problem will not feel the harsh reality of a stumbling economy. Their loss will be in percentage points of profit increases, while most of those struggling from pay check to pay check will face further quality of life challenges. As of now the Bush administration does not support restrictions on compensation for executives who might receive government bailouts. Seems like the good ol' boy network is alive and well. It seems to be a shame those responsible for these companies will be taken care of, while the American taxpayer foots the bill for irresponsible business. If we are truly a capitalist country, then we would let those companies who have dug themselves in a whole try to work through their problems on their own. If these companies can't evolve with the current economic situation, then they will fail and new blood should have to rise to the occassion.

  It's a huge story.  It's a huge event.  Where do we stop?  We've (conservatives) often complained that GWB is no conservative.  I think the cat's out of the bag.  I acknowledge that it's not hard to do the right thing when the right thing happens to be the only option left.  But, where were the truthtellers?  Where was the watchdog press?  What happened to the safeguards, in place to prevent a disaster like this?  All the brake lines were cut.

So, given our dire and precarious situation, let me be the slightest bit political.  What has our government ever taken control of that it flourished?  Where it provided the oversight to be successful? Amtrak?  FEMA?  The Post Office?  FNMA?  Don't we all wish now for the puny little federal deficit from a week ago? 

Anyone who blames this catastrophe on deregulation doesn't really understand what happened here.  Our government meddled in the market.  We (our government) made banks lend to substandard customers.  Millions of them.  They borrowed more than they could afford to pay back and we have all run out of time.  This isn't deregulation, it's government officials meddling in private commerce.  Social engineering.  And now we should turn over health care to them? 

Look, neither party is without blame.  But, the lesson isn't that we need the our brave, honest and ethical government officials to clamp down and show business how to conduct itself.  We need them to stay out of it.  Come on, at least see what happened.

Immensely important story, not just for 2008 but probably for years, even decades to come. The warning signs have been there for years, predicted by analysts and economists of both conservative and liberal ideology, but the greed heads weren't about to listen and investors loved the ride.

The long term effects will be felt worldwide, both by investors and everyone else, and the economic structure of American capitalism appears about to undergo a paradigm shift.

Middle to long term, look to see for the greater emergence of economic power in other wealthy nations, with America no longer at the top of the pyramid. That has been slowly happening anyway, but this event will goose the process dramatically.

As to its short term effect on the U.S. presidential election, I would expect it to benefit Obama slightly more, provided he spins it right, which so far he isn't doing. McCain's record on the economy is poor, and his sudden interest in "regulation" of Wall Street rings pretty hollow after years of being one of the great proponents of deregulation.

Huge story even if you're not an investor. . .money is ultimately based on trust- and when it's gone (or there is no real money or trust) the fit hits the shan (as they say in the office)   It is way too complicated to explain it here- but clearly some philosophical and economical paradigms should be discussed or altered because the wild ride has clearly come to some form of an end.  And there is pleny to blame to spread around. . .

A huge, huge story.  I watched a clip of Alan Greenspan the other day saying that he has never seen anything like this in his lifetime.  This is chilling A) because Greenspan is usually very measured when he speaks and not prone to hysteria; and B) He's like 130 years old.