The Federal Reserve cut a key U.S. interest rate by three-quarters of a percentage point this morning as a global stock sell-off continued on Wall Street today, with the Dow Jones industrial average dropping more than 400 points in its opening minutes. [So much for plan A...]

It is the largest single rate cut in at least 18 years, beyond even the initial half percentage point reduction that the Fed made following the 2001 terrorist attacks in New York and Washington. [Which triggered the housing boom, which got us into this mess in the first place.]

The global sell-off has involved some of the worst market declines since Sept. 11, 2001 and has erased more than $5 trillion in value from stock markets this year.

Indian shares plunged ... nearly 11 percent ... The Australian market suffered its worst one-day fall ever, while Japan's Nikkei fell 5.65 percent to its lowest point since 2005. It is down nearly 18 percent this year.

In Hong Kong, the Hang Seng Index was down 8.65 percent Tuesday, after dropping 5.49 percent on Monday. It's off 19 percent this year and is 30 percent lower than a peak in late October.

European markets were also adding to Monday's losses, though the pace of decline had moderated. London's FTSE 100, which lost 5.48 percent on Monday, was down 0.22 percent at midday. Germany's DAX index, down 7.16 percent on Monday, was off an additional 2.28 percent.

The companies that insure bond investors against defaults are having to make massive payouts. One, ACA Financial, owes $60 billion that it cannot afford to pay and has been taken over by the Maryland insurance regulator. Its credit rating has been lowered. [About which see more below.]

the Bank of China is exposed to subprime U.S. mortgage loans to a degree it had not previously disclosed and may have to write down the value of its $8 billion in such investments. [See the Atlantic articles linked below, especially the second one, for the fun that could cause.]

The following commentary was on the front page. I can't recall seeing an opinion piece on the front page of the print edition before.
More Room to Fall

One of those [bond] insurers, ACA, is effectively under the receivership of Maryland's insurance commissioner after losing more than $1 billion in the third quarter and seeing its credit rating drop from AAA to CCC in a single move. Merrill Lynch has been forced to write down $1.9 billion to reflect the likelihood of an ACA default, while the Canadian Imperial Bank of Commerce said it would have to issue $2.75 billion in additional stock to offset losses it thought it had insured against with ACA.

Also facing possible ratings downgrades -- and with that, the increased possibility of default-- are ACA's largest rivals, MBIA and Ambac. Together, those firms insure more than $2 trillion in loans, bonds and other securities. Because the credit-default-swaps market is almost completely unregulated, it's anyone's guess who is at the other end of those swaps.

You know what they say: A trillion here, a trillion there, and pretty soon you're talking about real money!

The $1.4 Trillion Question

Land of Plenty

if things fall apart and a Tom Clancy scenario unfolds in the Taiwan Strait you can forget about upgrading your PC or laptop for a while. The hundred miles of shallow seas separating Taiwan and China happen to be the most important yet most precarious link in the global ICT supply chain.

Now news that The Associated Press has prepared an obituary for 26-year-old Britney Spears has put the spotlight on a debate transpiring within the business of reporting death: With people grabbing the celebrity spotlight at a younger age, and some of them living lives of obviously dangerous excess, is it time for news organizations to begin preparing for early exits from celebritydom's under-30 crowd?

Update [2008-1-22 17:23:59 by wiredog]: "Heath Ledger Found Dead in NYC at Age 28" Drugs, apparently. I wonder if the Post had an obit ready...