After Congress failed to pass a $700 billion bank bailout plan, the Dow Jones Industrial Average falls 777.68 points—the largest single-day point loss in its history.
Down 7 percent, a greater loss than the 684.81 skid on September 17, 2001 (the first trading day post-9/11), the S&P 500 also suffered its biggest one-day loss since the 1987 crash, dropping 8.8 percent, and the Nasdaq fell 9.1 percent, its biggest single-day point loss in eight years.
The huge decline followed the bankruptcies of Wall Street brokerage firm Lehman Brothers, Savings and Loan bank Washington Mutual, as well as the Fed’s announcement that it would provide an $85 billion bailout for insurance provider American International Group (better known as AIG) to keep it from going under.
Also playing into things was a housing slowdown that triggered homeowners to suffer subprime mortgage defaults, widespread job losses and the Fed’s intervention to bail out investment bank Bear Stearns, as well as government-sponsored Fannie Mae and Freddie Mac.
Congress’s inability to pass the Bush administration’s bill led to fears that the nearly frozen credit markets wouldn’t be able to rebound quickly, causing sellers to shed their stocks. The Dow drop equaled a whopping $1.2 trillion loss in market value, contributing to the 18-month-long Great Recession.
Congress eventually did pass a bailout bill, with Bush signing the Emergency Economic Stabilization Act of 2008. The Dow drop remained the largest single-day point loss until 2018.