Stock market plunge erased 9 months of a rally in a few minutes. On the same day too big to fail amendment shot down by Senate.

It is amazing what occurred yesterday.  The media gave such a historical event little play.  In the matter of a few minutes the Dow plunged nearly 1,000 points erasing 9 months of stock gains ($500 billion in U.S. stock market wealth).  Stocks around the world also sold off on the event since many were left questioning what occurred.  But even before the plunge late in the trading day, the market was already down nearly 300 points on fears of European instability in particular with Greece.  The Euro fell to 1.25 against the U.S. dollar as people ran to safety.

To watch this collapse is actually stunning.  My streaming ticker was skipping over entire clicks on the downside; -20, -30, -50, etc.  It was a break in the systems that govern our capital markets:

What is probably even more stunning is on this same day, the Senate voted against an amendment to restricted and breakup the too big to fail banks:

“(Huff Po) A move to break up major Wall Street banks failed Thursday night by a vote of 61 to 33.

Three Republicans, Richard Shelby of Alabama, Tom Coburn of Oklahoma and John Ensign of Nevada, voted with 30 Democrats, including Senate Majority Leader Harry Reid of Nevada, in support of the provision. The author of the pending overall financial reform bill in the Senate, Banking Committee Chairman Christopher Dodd, voted against it. (See the full roll call.)

The amendment, sponsored by Sens. Sherrod Brown (D-Ohio) and Ted Kaufman (D-Del.), would have required megabanks to be broken down in size and capped so that their individual failure would not bring down the entire system.

Under Brown-Kaufman, no bank could hold more than 10 percent of the total amount of insured deposits, and a limit would have been placed on liabilities of a single bank to two percent of GDP.

In practice, the amendment required the six biggest banks — Bank of America, JPMorgan Chase, Citigroup, Wells Fargo, Goldman Sachs and Morgan Stanley — to significantly scale down their size. It was touted as a way to end Too Big To Fail.”

Even a 1,000 point intraday drop isn’t enough for Congress to get the memo.  27 months into this crisis and still no real reform or changes in the economy or financial system.

If you enjoyed this post click here to subscribe to a complete ad free feed.

Popularity: 1% [?]