A Wall Street Week Of Biblical Proportions

With Talk Of An Impending Financial Armageddon, The Gov't Takes Unprecedented Action. But Where Will It Lead?

(CBS)  We're taking stock this morning of the economic whirlwind that swept from Wall Street across the world this past week. Our Cover Story is reported by Martha Teichner:

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At least the Dow ended the week up … 410 points Thursday, 366 points Friday, a glimmer of optimism that the economy might not be allowed to implode after all.

From the moment word reached Wall Street Thursday afternoon that Treasury Secretary Henry Paulson was about to meet with congressional leaders about a massive bailout plan, stocks soared.

The photo op after the meeting was a picture of cooperation and bipartisan unity.

Then there was Paulson, looking like a man in a hurry, announcing his plan:
"We must now take further, decisive action to fundamentally and comprehensively address the root cause of our financial system's stresses."

And President Bush, speaking to an audience larger than Wall Street, on Friday morning: "Investors should know that the United States government is taking action to restore confidence in America's financial markets so they can thrive again."

Confidence … there is no more ephemeral, or essential, component in what amounts to a huge gamble that our leaders can pull our economy (perhaps even the global economy) back from the brink of collapse. Yes, that's apparently how bad things had gotten.

"These are the most difficult times I think our markets have faced in the last 200 years," former Securities and Exchange Commissioner Harvey Pitt told Martha Teichner.

Pitt spent a dozen years at the SEC and was its head from 2001-2003.

"Certainly it's been historical; it could've been Biblical," said Mark Zandi, chief economist of Moody's Economy.com and author of the book "Financial Shock: A 360º Look at the Subprime Mortgage Implosion, and How to Avoid the Next Financial Crisis" (FT press). "I mean, I was waiting for the locusts to fly through my office at one point."

"This could be comparable to the Great Depression in terms of just its effect on financial markets," said Robert Reich.

Now a professor at Berkeley, Reich was Labor Secretary under Bill Clinton. We asked him what lots of Americans are asking: How did it come to this?

"The people who were issuing warnings were not listened to," he said, "partly because Wall Street is very powerful in Washington. Wall Street kept on saying, 'Well, don't worry about anything, we have everything under control, we don't need more regulation.'"

Regulatory firewalls were put in place to prevent the financial excesses that led to the Great Depression. By the 1970s, banks and securities firms, caught up in major turf wars, lobbied for deregulation … and got it.

"We had over-leveraging in many of these firms," said Pitt, "and the net result was that people were leveraged, in some cases, as high as 100 to one."

People were also making piles of money by trading in packages of questionable mortgages and complicated, unregulated securities, called derivatives.

"Derivatives, essentially, are bets on how stocks or how bonds are going to move, and they're called derivatives because they are derived from those movement," said Reich.

But what if you bet wrong? That, say, the housing market will just keep going up but instead, the subprime mortgage meltdown happens? The whole house of cards collapses, taking Bear Stearns, Fannie Mae and Freddie Mac, Lehman Brothers, Merrill Lynch and AIG with it.

"We're scared, we're panicked, we don't even trust our money market mutual funds, which we all thought was one step removed from the mattress," said Zandi.

How's this for scared: Last Wednesday, after problems emerged in several funds, investors pulled nearly $90 billion out of others.

"Confidence, or the lack thereof, is what's driving this mess that we're in," Zandi said.

Which is why the U.S. government felt it had to intervene … fast.

"I am convinced that this bold approach will cost American families far less than the alternative: a continuing series of financial institution failures and frozen credit markets unable to fund economic expansion," Paulson said this week, in announcing the government's bid to bail out struggling financial institutions by purchasing their bad debt, at the cost of hundreds of billions of dollars.

We know a little more today about the proposal Paulson took to Congress: it would give the Treasury two years and $700 billion of taxpayer money to buy up distressed mortgages.

And then there's this scary number: $11,315,000,000,000, to which the federal debt ceiling would have to be raised, from the current $10.6 trillion dollars.

So will the bailout end the crisis?

"I think we're in the sixth inning of a nine-inning game," Zandi said, "and I don't think this is a double-header. So I think we're closer to the end than the beginning."

"Until we know for certain we've reached the bottom, that up-and-down motion is just going to continue," Reich said.

"I think that there will be a certain amount of continued difficulty through the end of the year," Pitt predicted.

But first there's tomorrow, when markets around the world take their next vote of confidence on the American economy as it prepares for emergency shock treatment.

[tapsettle]

The endgame is approaching and america is collapsing financially, overstretched militarily, discredited globally. If you voted Bush-Cheney (esp twice), congratulations on being one of the dumb-arses that helped to bring all that about.

[dmhphils]

Posted by adt14 at 01:21 AM : Sep 22, 2008

blah blah blah..........same old head in the sand liberal BS.....

[dmhphils]

Posted by usapride70 at 11:49 PM : Sep 21, 2008


I show you proof of the Christian roots on the government buildings which verifies that the founding fathers were men with Christian principles yet you still persist with your liberal BS. You are self-deceived and wilfully ignorant.....there is nothing to say to you that will open your blind eyes. You see, but you don''t perceive. You hear but you don''t understand.

[dmhphils]

anybody that listens to this nut (newster) deserves the darkness because that is where this guy lives......he lives and breathes darkness......and furthermore.....he hates God Who created him. ONe day you will wake up in hell nuzzzelling up with Satan when you realize it is his *** you have been sucking on all your life......but by then, it''s way tooooo late.

[dmhphils]

Seperation of Church and State was devised so that the Government could not mandate one religion for the whole nation. When the first settlers from Europe came here they were trying to escape from a mandated religion. They wanted freedom to choose their religion among other things.

The unbelievers are the ones who are intolerant. You attack anyone who doesn''''t believe(unbelieve) as you do. How are you any different than the ones you claim are are fanatics?


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Posted by usapride70 at 11:49 PM : Sep 21, 2008

You still stubbornly refuse to believe the FACTS!....The Christian ROOTS of this nation cannot be uprooted just because you deny they exist. You are in the dark!!!! even till now....

[nothappyatall]

The unbelievers are the ones who are intolerant. You attack anyone who doesn''''t believe(unbelieve) as you do. How are you any different than the ones you claim are are fanatics?

Posted by usapride70

Cause the religious reich are the one who voted BUSH in not once but TWICE solely due to his anti gay and anti choice agendas, BUSH is what you get when you allthe religious nuts to VOTE based on those two issues.
They voted in a moron who bankrupted or wrecked every business he had his hands in

[nothappyatall]

that being a country without God. You want to live without God? You may likely have the misfortune to live that experience.

Posted by noseonurface (Rick MiASSe, Truthword08, Singinrick., Providence_D and 1000 other lost alias and accounts)

We would do real fine without your Santa Claus in the sky slaughtering people by the thousands on a whim with ground movements and tsunami''s, but then you WOULD worship a cold blooded MURDERER who you claim "saves" people- from HIMSELF lol!!!!!
Get a JOB Rick and get off gezus, he will corrode you mind more than it already is.

[usapride70]

As long as we willfully disregard the foundation stones of nation, we are doomed, even if God has to take it all away, don''''''''t think that He won''''''''t.
Posted by noseonurface at 08:54 PM : Sep 21, 2008

Hey nose....last time I looked....our Constitution mandates separation of church and state. The Fathers of our Great Nation were wise enough to realize that we needed protection from religious zealots such as yourself, the Taliban, and every other organized religious sect on this planet that promotes control of the masses by fear.

If you don''''t like my United States of America...then get the hell out. The Taliban, or Islamic extremists, or the Christian Fundamentalists are always looking for members.


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Posted by sun247 at 09:09 PM : Sep 21, 2008

Seperation of Church and State was devised so that the Government could not mandate one religion for the whole nation. When the first settlers from Europe came here they were trying to escape from a mandated religion. They wanted freedom to choose their religion among other things.

The unbelievers are the ones who are intolerant. You attack anyone who doesn''t believe(unbelieve) as you do. How are you any different than the ones you claim are are fanatics?

[dmhphils]

If you don''''t like my United States of America...then get the hell out. The Taliban, or Islamic extremists, or the Christian Fundamentalists are always looking for members.


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Posted by sun247 at 09:09 PM : Sep 21, 2008

We will see how proud you are boasting when all your toys are gone....and you and all the other libs finally get what they want.....that being a country without God. You want to live without God? You may likely have the misfortune to live that experience. Good luck chump. Oh and btw, when you put that pistol in your mouth, make sure it''s at a 45 degree angle, or you might survive and just spend the rest of your miserable life in a wheelchair IF you can afford one.

[ubrew12]

rushlimpdrug said: "I am waiting for
a pizza order to show up. I will pay for it on my credit card. That should boost the economy some and help the market tomorrow morning. You can all thank me later."

Where does America find patriots such as yourself? Enjoy your pizza, you deserve it! And thanks for inflating, oops, I mean, ''growing'', our economy.