The Market Meltdown: A Year Later

There were rumblings before the fall of 2008.

The downfalls of Countrywide, Bear Stearns, and IndyMac made us ooh and aah. And curse.

But those opening acts couldn't prepare us for the shock of the headliner. Over the course of a few weeks, our entire financial system was on the precipice of ... of what, we're still not sure.

The Grim Reaper took bank after bank and sneered "Who's next?" each time. Troubled non-banks ironically converted to banks to gain access to government aid. The Treasury and Fed were put in the uncomfortable position of bailing water instead of steering the ship. We worried about the effects of bailouts, but we worried equally as much about the effects of no bailouts. Faith in the markets was shaken, as evidenced by the insane day-to-day price volatility and the news flash that short-term Treasury rates actually went negative ... yes, as a whole, we were paying the government money to hold our savings because we distrusted every other investment vehicle that much.

Look what happened in just over a month:  

  • Sept. 7, 2008 -- Fannie Mae (NYSE: FNM  ) and Freddie Mac (NYSE: FRE  ) go into conservatorship on a Sunday night, starting the "Weekend at Bernanke's" series.
  • Sept. 14, 2008 -- Bank of America (NYSE: BAC  ) announces it's rescuing Merrill Lynch, adding it into the lifeboat with Countrywide.
  • Sept. 15, 2008 -- That same weekend, the government draws the line and refuses to bail out Lehman Brothers, effectively forcing it into bankruptcy.
  • Sept. 16, 2008 -- The next day, the government rescues AIG (NYSE: AIG  ) .
  • Sept. 25, 2008JPMorgan (NYSE: JPM  ) buys a failed Washington Mutual from the FDIC. Make room in the JPMorgan lifeboat, Bear Stearns.
  • Oct. 3, 2008 -- Wells Fargo (NYSE: WFC  ) wins a battle with Citigroup (NYSE: C  ) for the honor of rescuing Wachovia.
  • Oct. 14, 2008 -- The $700 billion TARP program is rolled out, starting with a capital injection into the nine largest U.S. banks.

As we come up on all these one-year anniversaries, we Fools are looking back and taking stock. Bookmark this page and check back in over the next month or so as we put everything in perspective, debate the winners and losers, and discuss today's opportunities.

We'd love to hear your thoughts in the comments section, either on this article or in the articles listed below.

Looking Back

The Government's Role

Buy or Sell?

Anand Chokkavelu owns long-held shares of Citigroup. The Motley Fool has a disclosure policy.


Read/Post Comments (15) | Recommend This Article (37)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

  • Report this Comment On September 10, 2009, at 8:49 PM, jerryguru69 wrote:

    What we have learned from the market meltdown is that we have not yet learned from the market meltdown. There is much talk of plugging regulatory holes, new rules and laws, and carefully managing the bailout moneys, but the cancer is still with us: C, AIG, FRE, FNM. These zombie financial institutions are clogging up and contaminating the credit pipelines. Things will never return to normal until these totally disappear.

    FRE, FNM: these guys started the whole mess by securitizing mortgages in the first place. Simply kill them; banks and investors, you are on your own for MBSs. Wait, they make 70% of all mortgages in 2009? They are that important? OK, let us just nationalize them and turn them into a federal agency.

    C: dismember it, sell of the good bits, and put the corpse into bankruptcy. At the very least, force it to cough up Travelers Insurance (along with any other bank that has acquired an insurance company), and put Glass-Steagall back into place.

    AIG: this is, supposedly, a perfectly good insurance company with an over-leveraged hedge fund around its neck. OK, lets spin off the insurance bits and unwind the hedge fund part. And, while we are at it, make it illegal for any company to have a hedge fund attached to it unless it is already a hedge fund.

    I can hear Pandit and Benmosche now: these big bits are central to our corporate identity and mission statement. Very good, gentleman, you will need a new one.

  • Report this Comment On September 11, 2009, at 5:48 AM, plange01 wrote:

    911 anniversary...with the US leaderless and sinking deeper into a depression it is no closer to rebuilding the world trade center than it was 5 years ago.this continues to be a great victory for terrorism and a sad example of a once great country now in decline....

  • Report this Comment On September 11, 2009, at 10:30 AM, plange01 wrote:

    a year later stocks are higher but the US is now over 9 months into a depression and everything else is getting worse.its only a matter of time before stocks face reality and return to year ago levels and below....

  • Report this Comment On September 11, 2009, at 2:39 PM, TxTom wrote:

    Just have to love it when people say stocks will get far worse.

    I'd jump at the opportunity to buy at early 2009 levels again, but that is just wishful thinking. Those who aren't getting into the market at this time will regret their reluctance.

    We can argue back and forth about which way the market is going, but we'll all find out by the first part of 2010. I say UP.... anyone else??

  • Report this Comment On September 11, 2009, at 2:40 PM, gkirkmf wrote:

    Not a gold bug, but couldn't help but notice that gold was at $800 one year ago, and is now sitting around $1000. Does this portend things to come?

    jerryguru69 , It looks like you have been studying Paul Volcker's prescription for a market fix... unfortunately, the Obama administration has not seen fit to follow his advice.

  • Report this Comment On September 11, 2009, at 5:31 PM, shoobl2 wrote:

    I don't see enough evidence that action is being taken against the CEOs and other top executives that; played so wildly, received and are still receiving unbelievably high salaries and bonuses. If the SEC isn't going to go after these @#!!*^% then may be some heads need to roll there as well.

  • Report this Comment On September 13, 2009, at 2:09 AM, happyotter wrote:

    most people who screw up get fired

    ny bankers got and continue to get bonuses for bad work - except for their personal profits

    hmmm.... more bad work of the same sort should lead to more rewards so why should i change my behavior

    and we wonder why the situation still stinks

    the Danes have put a lid on c bonuses - what a novel idea - works everywhere but ny

  • Report this Comment On September 14, 2009, at 6:40 PM, afamiii wrote:

    Consumers and businesses appear to have learnt that too much debt is bad. Unfortunately, government has not relearnt it too. www.smartinvestorafrica.com

  • Report this Comment On September 15, 2009, at 12:51 PM, clydejazz wrote:

    So what's to stop this mess from happening again?

    Very little. Financial executives are already railing against too much regulation, but we don't have much in the way of new legislation to keep bankers from repeating the dumb moves, which we pay dearly for, and they get rewarded for.

    Bring back Glass-Steagall, for a start.

    I'll say that again: bring back Glass-Steagall.

  • Report this Comment On September 17, 2009, at 11:10 AM, MrShahzadAnwar wrote:

    The Main Reason for this Economic Meltdown is simple, too much reliance on interest & credit money. The whole banking system of the prevalent world is totally mediocre and it relies on the spider's web which ultimately repeatedly falls to the pit. We have to rise again and then again we fall to these crises. Again and again this cycle of mania will go on and on unless some radical changes are brought about in the economic system.

    For this we will need a new economic messaiah as even small changes in the banking and economic system is g8ly opposed by those satanic banking Goliaths...

  • Report this Comment On September 18, 2009, at 11:36 PM, Retirefunds wrote:

    The "shock of the headliner" of the 2008 meltdown, as you point out, will only be a foot note in comparison to the shock of 2010-2014

    As the "Gluttons of Wall Street" morph into vultures at this writing, readying to swoop in on the carcasses of the final vestige of security for many of the middle class (your life insurance policies) we are reminded that they have learned nothing from history. They don't want to.

    This time, while they feed, the commercial real estate market will begin to melt in the absence of refinancing and trust. The banks will by then, "have to" count their toxic derivatives (the elephant still sitting in the room) all while the world is trying to find stores of value outside of the USD.

    It would take clear Honesty and integrity to set things straight but like Elvis and Michael, honesty and integrity have left the building.

    Pain and loss will be all that is left.

  • Report this Comment On September 18, 2009, at 11:38 PM, Retirefunds wrote:

    To find out how I really feel, see my blog entry at:

    http://retirefund.blogspot.com/2009/09/wall-street-vultures-...

  • Report this Comment On September 19, 2009, at 1:26 AM, lynnmarie88 wrote:

    A year later.... I don't feel the sense of dread and gloom that I felt last year. I know things have a long way to go, but I feel we are now headed in the right direction.

  • Report this Comment On October 09, 2009, at 2:31 PM, rikster720 wrote:

    How do we experience what we experienced a year ago, when all of us were on the "ledge", and are still experiencing today because of what happened last year and only see Bernie Madoff in jail. How aren't the jails full of the people responsible for the meltdown and the unalterable downsizing of the U.S. economy. Where are the felons that knowingly stole the wealth of this country, including members of Congress...from both parties. Why hasn't Congress investigated itself and at least censured those members who blindly let the country almost collapse. Justice? What justice?

  • Report this Comment On October 09, 2009, at 4:55 PM, SageOrFool wrote:

    We are at the outset of the American Dream gone sour. If we put our money in our piggy banks we get screwed by CitiGroup. If we put our money in stocks we get screwed by market meltdowns. 401K is no better. No wonder cash is king and gold is queen. Maybe it's time for me to learn how to bake and open up a Mom & Pop soup kitchen right out of my house.

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