Party Like It's 1997...Dow Closes Down 250 Points For The Day

And the age of plenty continues. Remember when people thought 8,000 was the likely floor? Yeah, that was some time ago, wasn't it?

Investors unable to extinguish their worries about a recession that has no end in sight dumped stocks again Monday. The Dow Jones industrial average tumbled 251 points to its lowest close since Oct. 28, 1997, while the Standard & Poor's 500 index logged its lowest finish since April 11, 1997.

All the major indexes slid more than 3 percent. The Dow is just over 100 points from 7,000.

"People left and right are throwing in the towel," said Keith Springer, president of Capital Financial Advisory Services.

Investors pounded most financial stocks even as government agencies led by the Treasury Department said they would launch a revamped bank rescue program this week. The plan includes the option of increasing government ownership in financial institutions without having to pour more taxpayer money into them.

Although the government has said it doesn't want to nationalize banks, many investors are clearly still concerned that this could be a possibility as banks continue to suffer severe losses because of the recession. They're also worried that banks' losses will keep escalating as the recession sends more borrowers into default.

I'm not even going to pretend to have a clue about any of this but it's clear that either in name or reality there will be some sort of bank nationalization. We're only in the last week of February and already both Citi and Bank of America have lost almost 70% of their value. Mind you, I'm not arguing for this, I'm just saying the reality is there's no way the government is going to let those two institutions simply disappear.

Given the terms of TARP, the government could simply convert its existing warrants into shares that would control about 75% of the company's stock, it's hard to say at some level it hasn't already happened.

What comes next? I have no idea but then again, neither does anyone else really. The only safe bet is it won't be good.

posted by DrewM. at 04:55 PM

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