$700 Billion Bailout bill fails to pass – Dow down 700 points

This article was last updated on May 31

In an unfortunate symmetry of events the Dow swooned more than 700 points as the $700 billion bailout bill failed to pass in the House of Representatives. There were rumors that trading on the NYSE would be halted due to preset triggers for preventing a stock market collapse. Analysts and market watchers were stunned at the outcome with most expecting the bill to pass given all the haggling last week and comments made by senate and house leaders yesterday. As the WSJ summarized the issue “A bipartisan group of U.S. House lawmakers defeated a $700 billion rescue plan [228 – 205] rejecting pleas from the Bush administration and congressional leaders from both parties of the potential dire consequences of policy makers not acting to help financial markets”

The Republicans were the ones that rejected the bill, sending the message to financial markets that they’ll have to solve their problems on their own, without $700 billion of taxpayer money. Or as a Maketwatch head line said : “House to Wall Street: Drop dead“. So much for John McCain coming into to help getting the bill passed. I am sure there will be a lot of back door discussions happening right now, trying to amend the bill and get it through again is some form. In the meantime TRILLIONS of dollars are being wiped away from stock markets and investment portfolios around the world. Global markets fell by 1-2% on average overnight and if today’s Dow and Nasdaq action is any guide, we could see 10% plus falls tomorrow. What’s got me really spooked today is the string of collapses of big banks around the world suggesting that the crisis is only starting in global terms. If this spreads to India and China, their growth could be severely curtailed sending the entire world into a long/deep recessions. Cash is king right now and you better ensure you are adequately protected

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