October 7, 2008 (Tuesday): Obama and McCain Face Off on Economy; Dow Drops to 9,447

At the second presidential debate in Tennessee, the looming financial crisis sets the stage. Sen. Barack Obama, pulling ahead in the polls, points the finger for the poor economy at President Bush and the Republicans, whose “failed economic policies” he claims are to blame for the meltdown. In response, Sen. John McCain charges that Obama consistently votes for increased spending, would raise taxes in a poor economy, and would be a weak proponent of nuclear power as President. (For more on this news, click here, here and here.)

Former American International Group executives testify before irate members of Congress today about their compensation and company perks—including a lavish retreat at the Monarch Beach St. Regis, which cost the company $442,000, including $23,000 in spa charges. The retreat occurred a week after AIG took an $85 billion government loan. For their part, the execs blame AIG’s gargantuan writedowns on mark-to-market accounting rules. A former Securities and Exchange Commission accountant likens that to “blaming the thermometer…for a fever.” (For more on this news, click here, here and here.)

After a brief rally at the opening, stocks take enormous hits today despite Fed Chairman Ben Bernanke’s seeming openness to the notion of cutting interest rates by the end of the month. The S&P 500 tumbled below 1,000. Shares of Bank of America, Merrill Lynch and Morgan Stanley all lose about 25%, with KeyCorp and JPMorgan sliding more than 10% each. Not only the banks take hits: American Express and Disney drop 6% each, as well. The Dow closes down 508.39 points to 9,447.11. (For more on this news, click here and here.)