You know it's a volatile day in the financial markets when CNBC.com's afternoon headline is: "Dow Closes Down 600"...when the Dow shed almost 800 points. Yikes. That's a big, telling gap as the late-day action settled out.
As everyone knows, the driving force behind this afternoon's hemorrhaging was the defeat of the amended intervention legislation in the House of Representatives. In political terms, House Democrats delivered substantially more votes than did House Republicans, though one of the interesting dynamics here is the combined effect of free-market ideology on the right ("Do we believe in market discipline or not!?") and populist ideology on the left ("No bailouts for Wall Street while Main Street suffers!").
These are remarkable times, and we don't pretend to know, sitting here, knowing as little as we know about real-time conditions in the credit markets, what the best possible solution is. But as we wrote last week, given the profound reality of interdependence, the demise of confidence in the banking system is a genuinely perilous state of affairs. Not just for Wall Street. For every street on the map.
Our expectation is that some sort of legislation will return to the House floor later this week. If by some coincidence any Hill staffers are reading this item, we'd like to recommend the most recent comment from John Hussman. This is a very sober, very sophisticated prescription for what ails us, and it's well worth your consideration.