Almost Armageddon: Markets were 500 Trades from a Meltdown

MICHAEL GRAY
The New York Post
September 26, 2008

The market was 500 trades away from Armageddon on Thursday [September 18], traders inside two large custodial banks tell The Post.

Had the Treasury and Fed not quickly stepped into the fray that morning with a quick $105 billion injection of liquidity, the Dow could have collapsed to the 8,300-level – a 22 percent decline! – while the clang of the opening bell was still echoing around the cavernous exchange floor.

According to traders, who spoke on the condition of anonymity, money market funds were inundated with $500 billion in sell orders prior to the opening. The total money-market capitalization was roughly $4 trillion that morning.

The panicked selling was directly linked to the seizing up of the credit markets – including a $52 billion constriction in commercial paper – and the rumors of additional money market funds “breaking the buck,” or dropping below $1 net asset value.

The Fed’s dramatic $105 billion liquidity injection on Thursday (pre-market) was just enough to keep key institutional accounts from following through on the sell orders and starting a stampede of cash that could have brought large tracts of the US economy to a halt.

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2 Responses to “Almost Armageddon: Markets were 500 Trades from a Meltdown”

1. Chad Says:
   September 26th, 2008 at 9:41 am

   In the full article, it notes how Mr. Paulson knew that the $105B “injection” was not a real solution…!

2. Dave Says:
   September 26th, 2008 at 9:52 am

   Stop leaving yourselves vulnerable. Learn how to become self-sustainable.
   http://cheapogroovo.vox.com