A somber President Bush addressed the nation on Sept. 24, warning of a "long and painful recession" if Congress failed to pass the $700 billion bailout, called the Emergency Economic Stabilization Act of 2008, for flailing financial firms proposed by Treasury Secretary Henry Paulson.

Congress listened.

After initially rejecting Paulson's plan, the House of Representatives did an about-face Oct. 3, passing the measure by a 263-171 margin - possibly because it was attached to a bill ordering the insurance industry to provide greater mental health coverage, something many members of Congress would likely benefit from.

"We have acted boldly to help prevent the crisis on Wall Street from becoming a crisis in communities across our country," Bush said shortly after the House vote. "We have shown the world that the United States of America will stabilize our financial markets and maintain a leading role in the global economy."

New World Odor
Well, maybe I'm the one who needs expanded mental health benefits, but how much more of this "stability" can the world economy take? Since the rescue plan passed, the Dow is down 5.1% and the Nasdaq 5.8%. (To learn more, read Why The Dow Matters.)

Across the globe, the situation is even worse. On Monday, London's FTSE 100 slumped 7.9%, the CAC 40 in Paris plunged 9%, the XETRA DAX in Frankfurt fell 7.1% and Russia's RTS index was shut down after it plummeted 20%. The Australian Securities Exchange dropped 3.4%, Japan's Nikkei Exchange dipped 4.3% and Mexico's IPC Index tumbled 9.6%. Instead of a financial solution, how about legislation stipulating that absolute values be used whenever market averages are discussed - perhaps that would restore investor confidence.

Lessons Learned?
Adding to the post-bailout stability on Monday was a third quarter earnings report by Bank of America (NYSE:BAC) - believed to be one of the healthier banking operations - announcing a 68% drop in profit, as well as a plan to raise more capital by cutting the company's quarterly dividend in half and attempting to sell $10 billion of common stock.

Of course, this cheerful news comes just three weeks after Bank of America spent $50 billion to acquire Merrill Lynch (NYSE:MER). "There's some concern they might have bit more than they could chew," Marc Pado, U.S. market strategist at Cantor Fitzgerald & Co., told Reuters at the time of the Sept. 15 sale.

Meanwhile, Richard Fuld, chairman and CEO of Lehman Brothers (OTC:LEHMQ) claimed federal regulators knew the dire condition his firm was in long before its collapse and said he would wonder "until they put me in the ground" why the U.S. government did not offer Lehman the same helping hand it extended to American International Group (NYSE:AIG), Bear Stearns and others.

Growing Concern
Given all this, is it any wonder that a recent CNN/Opinion Research Corp. poll revealed that 84% of Americans believe that economic conditions are somewhat or very poor and that nearly six out of 10 believe an economic depression is likely?

Why, it's enough to give one high blood pressure. Luckily, doctors tell me mine is "stable."

To learn more, see The Crash Of 1929 - Could It Happen Again?

Related Articles
  1. Economics

    Can the Market Predict a Recession?

    Is a bear market an indication that a recession is on the horizon?
  2. Investing

    How to Ballast a Portfolio with Bonds

    If January and early February performance is any guide, there’s a new normal in financial markets today: Heightened volatility.
  3. Stock Analysis

    Performance Review: Emerging Markets Equities in 2015

    Find out why emerging markets struggled in 2015 and why a half-decade long trend of poor returns is proving optimistic growth investors wrong.
  4. Investing News

    Today's Sell-off: Are We in a Margin Liquidation?

    If we're in market liquidation, is it good news or bad news? That party depends on your timeframe.
  5. Investing News

    Bank Stocks: Time to Buy or Avoid? (WFC, JPM, C)

    Bank stocks have been pounded. Is this the right time to buy or should they be avoided?
  6. Stock Analysis

    Why the Bullish Are Turning Bearish

    Banks are reducing their targets for the S&P 500 for 2016. Here's why.
  7. Stock Analysis

    How to Find Quality Stocks Amid the Wreckage

    Finding companies with good earnings and hitting on all cylinders in this environment, although possible, is not easy.
  8. Investing News

    What You Can Learn from Carl Icahn's Mistakes

    Carl Icahn has been a stellar performer in the investment world for decades, but following his lead these days could be dangerous.
  9. Stock Analysis

    Are U.S. Stocks Still the Place To Be in 2016?

    Understand why U.S. stocks are absolutely the place to be in 2016, even though the year has gotten off to an awful start for the market.
  10. Investing News

    U.S. Recession Without a Yield Curve Warning?

    The inverted yield curve has correctly predicted past recessions in the U.S. economy. However, that prediction model may fail in the current scenario.
RELATED FAQS
  1. Which mutual funds made money in 2008?

    Out of the 2,800 mutual funds that Morningstar, Inc., the leading provider of independent investment research in North America, ... Read Full Answer >>
  2. Do interest rates increase during a recession?

    Interest rates rarely increase during a recession. Actually, the opposite tends to happen; as the economy contracts, interest ... Read Full Answer >>
  3. What are the risks of annuities in a recession?

    Annuities come in several forms, the two most common being fixed annuities and variable annuities. During a recession, variable ... Read Full Answer >>
  4. How do dividends affect retained earnings?

    When a company issues a cash dividend to its shareholders, the retained earnings listed on the balance sheet are reduced ... Read Full Answer >>
  5. What is the difference between called-up share capital and paid-up share capital?

    The difference between called-up share capital and paid-up share capital is investors have already paid in full for paid-up ... Read Full Answer >>
  6. Why would a corporation issue convertible bonds?

    A convertible bond represents a hybrid security that has bond and equity features; this type of bond allows the conversion ... Read Full Answer >>
COMPANIES IN THIS ARTICLE
Trading Center