Stock prices plummeted on Monday following the dramatic restructuring of two venerable Wall Street financial institutions.
The Dow Jones Industrial Average fell 504 points, or 4.42%, to 10,917 after Lehman Brothers filed for Chapter 11 bankruptcy and Merrill Lynch was taken over by Bank of America Corp. It was the Dow’s sixth sharpest single day drop in its history.
Broader measures of the market also fell sharply. The S&P 500 fell 4.64% and the NASDAQ was down 3.6%.
There was one bright spot amid the turmoil. Oil prices tumbled 1% to $94.78 per barrel as damage to oil facilities from Hurricane Ike was less than initially feared and traders worried about a global economic slowdown.
President Bush ruled out another government bailout of financial institutions following last week’s federal takeover of Fannie Mae and Freddie Mac.
"We are working to reduce disruptions and minimize the impact of these financial market developments on the broader economy," President Bush said. "The policymakers will focus on the health of the financial system as a whole."
The financial crisis was addressed by both presidential candidates on the campaign trail.
"I am glad to see that the Federal Reserve and the Treasury Department have said no to using taxpayer money to bailout Lehman Brothers," said Republican nominee John McCain. "We are carefully monitoring the financial markets, including the duress at Lehman Brothers that is the latest reminder of ineffective regulation and management. Efforts must also be focused on ensuring that the deposits of hardworking Americans are protected."
Democratic nominee Barack Obama said it "the most serious financial crisis since the Great Depression" of the 1930s.
"The challenges facing our financial system today are more evidence that too many folks in Washington and on Wall Street weren’t minding the store," Sen. Obama said. "Eight years of policies that have shredded consumer protections, loosened oversight and regulation, and encouraged outsized bonuses to CEOs while ignoring middle-class Americans."
Lehman Brothers filed for bankruptcy after failing to attract buyers for the 158-year-old investment bank. The financial institution held more than $60 billion in bad real estate holdings.
Bank of America bought financial services giant Merrill Lynch for $50 billion in stock. Bank of America is the largest U.S. bank, while Merrill Lynch is the largest brokerage firm.
Another financial giant — AIG — could be the next Wall Street institution to fail. Share’s for the insurance company fell more than 60% on Monday as it sought capital to stay afloat.