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Markets Down Sharply

ROBERT SIEGEL, host:

From NPR News, this is All Things Considered. I'm Robert Siegel.

MELISSA BLOCK, host:

And I'm Melissa Block. If that $700 billion financial bailout was supposed to help restore investor confidence, it's not working. Today there were sharp losses in markets all over the world. At one point today, the Dow was down nearly 800 points. It partly recovered, closing down about 370 points and below the 10,000 mark for the first time in four years. For more on what's going on in the markets, we turn to NPR's Jim Zarroli in New York. And Jim, why don't you walk us through what happened throughout the course of the day on the markets?

JIM ZARROLI: Well, this is the kind of day, Melissa, that just makes people on Wall Street just crawl into the corner and sob their hearts out. At one point in the day, the Dow was down nearly eight percent. Then it recovered, but it still finished below 10,000 for the first time since October 2004. And here's another number. It was a year ago this coming Thursday that the Dow hit its all-time high, which was 14,164.

BLOCK: What a difference a year makes.

ZARROLI: Yeah. It's down nearly 30 percent since then. But this was just a terrible day. The only reason I think it doesn't seem worse is that we've had so many of these, you know, triple-digit loss days, I think we're getting a little bit numb to them. But it was bad in the United States. But you also saw just punishing drops in the stock markets in Europe, in Asia, Latin America, everywhere, all over the world.

BLOCK: And if you look at what's going on in those global markets, it's becoming clear that this credit crisis that we're talking so much about here in the U.S. is happening everywhere you look.

ZARROLI: That's absolutely right. There was a time not so long ago that the credit crunch seemed like it was an American problem. I think now we're seeing banks in Germany and Iceland and Belgium just teetering on the edge. I mean, there is a lot of evidence right now that we're going into a global recession. And as a result, banks are just terrified to lend. Lenders don't want to lend to anybody because they really don't know, you know, what kind of bad assets the borrower has on his balance sheet. And it just seems to get worse all the time. The credit markets are really just paralyzed, and I don't think anybody knows how to solve that at this point.

BLOCK: You know, the same time that we're seeing these big dips in the markets, there was also a steep drop in oil prices today. How do those two things connect?

ZARROLI: Well, this is what happens when people think the economy is in trouble. They think that demand for commodities is going to fall. This causes prices to go down. And there has just been, you know, a huge drop over the past few months in corn, soy beans, copper, all kinds of commodities. But also oil. Oil was down below $90 a barrel today. Now obviously that's a good thing for the economy, right? Because it makes it cheaper for companies to operate. It makes it cheaper for people to buy gasoline and heating oil. But it is bad for countries that sell commodities, countries like Canada, Russia, Brazil. The stock markets in Russia and Brazil were actually down so much they actually had to suspend trading for a while today.

BLOCK: Jim, let's walk this back just a little bit. The financial bailout bill was signed into law on Friday. Now here we are on Monday, and it's clear that the legislation hasn't restored order or confidence in the markets. Why is that?

ZARROLI: Well, the idea with the bailout was that if the government started, you know, buying up all this bad mortgage debt, then the banks would be able to clean up their balance sheets. Everybody would feel, gradually anyway, like it was safe to lend. Ironically, as soon as the deal was approved, the stock market began to fall, and it fell more today. Today, I talked to Art Hogan about what is going on. He is the chief market analyst at Jefferies & Company. And I asked Art Hogan why the market doesn't seem to be more enthused about the bailout. And he said, you know, that's really the $64,000 question.

Mr. ART HOGAN (Chief Market Analyst, Jefferies & Company): We're going to have to look at this and say, well, that was necessary, but it's not going to have an immediate effect. It's not like going to the doctor with strep throat, he gives you a shot, you go home, and you're all set. It's going to take a while for the fix to settle in.

ZARROLI: And so, in other words, the bailout should help. But this is a huge problem, and we shouldn't expect it to be solved overnight. That's essentially what President Bush said today, also.

BLOCK: In the meantime, Jim, do you think there are other intermediate steps that might be taken?

ZARROLI: We're seeing a lot of individual steps being taken. We're seeing the central banks pouring money into the financial system. But I think a lot of economists just say that, you know, something bolder is needed, maybe a coordinated interest rate cut by all of the central banks. But I think the question now is just, you know, is there much political leaders can do to control this? Maybe the situation has to play itself out.

BLOCK: OK, NPR's Jim Zarroli in New York. Jim, thanks a lot.

ZARROLI: You're welcome. Transcript provided by NPR, Copyright NPR.

NPR transcripts are created on a rush deadline by an NPR contractor. This text may not be in its final form and may be updated or revised in the future. Accuracy and availability may vary. The authoritative record of NPR’s programming is the audio record.

Jim Zarroli is an NPR correspondent based in New York. He covers economics and business news.
As special correspondent and guest host of NPR's news programs, Melissa Block brings her signature combination of warmth and incisive reporting. Her work over the decades has earned her journalism's highest honors, and has made her one of NPR's most familiar and beloved voices.