Yikes! Stock Market Takes a Nose Dive

You've probably been hearing a lot about the U.S. economy and the stock market lately. Maybe your parents are crankier than usual and not as willing to pay for pizza or a night at the movies.

The economy isn't doing so well (you can read about some of the reasons in Issue 5 of Current Events). Over the past three weeks, several big investment banks have closed because they lost too much money on bad investments. That has had a ripple effect across the economy.

President George W. Bush says the government needs to step in right now to help Wall Street recover. He asked Congress for $700 billion in taxpayer money (that's $700,000,000,000) to help bail out the struggling banks. Bush warned that the economy would suffer if Congress didn't say yes.

Congress voted on the president's plan today. Congress said: No.

Investors got scared when they heard that Congress was voting no, and they began pulling their money out of the stock market fast. The stock market took a nose dive. It lost 777 points, falling to 10,365. That's the largest one-day point drop the Dow Jones Industrial Average has ever seen. It wasn't the market's worst day, though. Back in 1929, the market lost 13 percent of its value in one day. Today's loss was about 7 percent of the market's value. That's still a big drop. The stock market has far more money invested in it today than it did 80 years ago. When worried investors pulled their money out today, the market lost $1 trillion.

What's going to happen next? No one really knows. That's why so many people are worried.

A lot of Congress members who voted against the president's $700 billion bailout plan said they knew something had to be done, but they thought it was wrong to use money from middle class taxpayers on Main Street to fix the mess made by wealthy investors on Wall Street. Many of the Congress members who voted for the plan didn't like it either, but they said the economy had to be saved.

Now the president and leaders in Congress are going to have to sit down again and try to find a new solution to the nation's serious economic problems.

UPDATE (Sept. 30): President Bush spoke to the nation this morning about the crisis on Wall Street. The president said he was disappointed that Congress had rejected his bailout plan, but he said he would continue working toward a solution. "The reality is that we are in an urgent situation, and the consequences will grow worse each day if we do not act," Bush said. Congress meanwhile, is taking two days off because today is Rosh Hashanah, the Jewish new year. Good news from the stock market today: It bounced back up nearly 485 points, regaining about two-thirds of what it lost on Monday.

UPDATE (Oct. 3): President Bush and members of Congress rewrote the $700 billion bailout plan. Today, Congress approved it, and the president signed it into law. Now we'll see if it works to help our economy recover.

Photos: The scenes inside and outside the New York Stock Exchange on Wall Street in New York City. -The Associated Press