Triumphant over the House's 'no' vote? Wait until you're old
Opposition to the bailout could bring more days like Monday, when many investors saw their holdings fall by near double-digit percentages. That is going to hurt your 401(k) more than it will the fat cats.
The anti-bailout crowd got what it wanted Monday: More pain for Wall Street fat cats, to the tune of the biggest one-day drop in key stock indexes since the 1987 market crash.
Unfortunately, that pain also was felt in the not-so-fat 401(k) retirement savings plans of millions of Americans.
The 777-point, 7% plunge in the Dow Jones industrial average, fueled in large part by the U.S. House's "no" vote on the White House's $700-billion financial-system rescue, points up the dilemma for many of those who oppose the measure as a handout to Wall Street.
Nobody really wants to help the investment and commercial bankers who dug their own graves by lending recklessly during the housing bubble.
But amid deepening gloom about the financial system and the economy, rooting for the banks' demise now risks more days like Monday -- when many people saw the value of their stock holdings fall by near double-digit percentages in a mere 6 1/2 hours of trading.
That's going to hurt the average worker with money in the market far more than it will hurt a bank executive with millions of dollars to spare and a generous pension to boot.
On Monday, the selling was so fierce that only a relative handful of stocks rose. And many companies that have nothing to do with banking were hammered.
Shares of Google Inc. plummeted 12% to $381, a two-year low. U.S. Steel Corp. tumbled 17%. Energy giant Chevron Corp. slumped 11%.
I can only imagine that some people who oppose the bailout are smelling a conspiracy. After all, the more damage stock prices suffer, the greater the pressure on the House to come back and approve the administration's proposal or some version of it that achieves the same end: using public money to buy up toxic mortgages from lenders and investors.
On CNBC early Monday, with the Dow already down about 500 points, one commentator said the "worst thing that could happen" would be for the market to rally back by the closing bell and lose only a couple of hundred points for the session.
That, he said, would suggest to House members who voted against the plan that the market could live without it after all.
Blackmail by Wall Street?
More likely, what's happening with stocks is mirroring what has been happening in the banking system for the last few weeks, as frightened lenders, brokerages and other financial institutions increasingly hoarded cash rather than put the money into the economy in the form of a loan or an investment.
