Back in the dotcom era, everyone used to ask me if I played the Stock Market. And I said no, I'm too conservative for that. And everyone laughed like it was a joke. And it wasn't- I remember 1987 quite well, having seen filled to the seams PATH trains empty out for several years. And I also remember the speculation bubble in comics in the early 90s all too well. Well, it looks like the wheels have finally come off.
NEW YORK — Wall Street plunged again Wednesday as anxieties about the financial system ran high after the government's bailout of insurer American International Group Inc. failed to restore investors' confidence in banking stocks. The Dow Jones industrial average lost about 450 points, giving it a shortfall of more than 800 so far this week.
As investors fled stocks, they sought the safety of hard assets and government debt, sending gold, oil and short-term Treasurys soaring.
The market was more unnerved than comforted by news that the Federal Reserve is giving a two-year, $85 billion loan to AIG in exchange for a nearly 80 percent stake in the company, which lost billions in the risky business of insuring against bond defaults. Wall Street had feared that the conglomerate, which has extensive ties to various financial services industries around the world, would follow the investment bank Lehman Brothers Holdings Inc. into bankruptcy. However, the ramifications of the world's largest insurer going under likely would have far surpassed the demise of Lehman.
"People are scared to death," said Bill Stone, chief investment strategist for PNC Wealth Management. "Who would have imagined that AIG would have gotten into this position?"
He said the anxiety gripping the markets reflects investors' concerns that AIG wasn't able to find a lifeline in the private sector and that Wall Street is now fretting about what other institutions could falter. Over the past year, companies including Lehman and AIG have sought to reassure investors that they weren't in trouble, but as market conditions have worsened the market appears distrustful of any assurances.
"No one's going to be believing anybody now because AIG said they were OK along with everybody else," Stone said.
The two independent Wall Street investment banks left standing _ Goldman Sachs Group Inc. and Morgan Stanley _ remain under scrutiny, as does Washington Mutual Inc., the country's largest thrift bank. Morgan Stanley revealed better-than-expected quarterly results late Tuesday and insisted that it is surviving the credit crisis that has ravaged many of its peers.
Lehman filed for bankruptcy protection on Monday, and by late Tuesday had sold its North American investment banking and trading operations to Barclays, Britain's third-largest bank, for the bargain price of $250 million. Over the weekend, Merrill Lynch & Co., the world's largest brokerage, sold itself to Bank of America Corp. in a quickly arranged plan to sidestep further slides in its stock.
Yikes. Yikes, I tell you.
Ailing bank Washington Mutual Inc. appeared headed toward a sale Wednesday after a major investor removed a potential stumbling block and nervous banking regulators began approaching the most logical buyers.
The New York Times, citing unidentified people familiar with the matter, said an auction of the bank was already under way, and The Wall Street Journal reported Wells Fargo & Co. and Citigroup Inc. expressed interest in a takeover.
WaMu, Wells Fargo and Citigroup all declined to comment.
A concession by investment firm TPG, which injected $7 billion into WaMu five months ago, may have opened the way to a sale — or, failing that, made it easier for the bank to raise another round of capital.