July 24 2008 (LPAC)--Despite recent efforts by the Plunge Protection Team to pump up bank stocks to disguise the disaster known as the U.S. banking system, stocks of banks and other financial institutions had their worst day in eight years today. The nominal trigger for the decline was a sharper-than-forecast slide in home sales and a prediction that the commercial and investment banks will lose as much as $1 trillion on their real estate speculation, but underlying the reaction is a deep fear that we are a long way from the bottom of this crisis. Fannie Mae and Freddie Mac, the centerpieces of the government effort to bail out the banks by transferring losses from private institutions to government-guaranteed ones, fell 20% and 18%, respectively, and other big financial institutions followed not far behind, with Merrill Lynch dropping 14%, Washington Mutual 13%, Lehman Brothers 12%, Wachovia 11%, and Citigroup 10%. Washington Mutual (or WaMu, the nation's biggest thrift), has dropped 31% in the past two days. Though led by financials, the route also saw Ford, which announced a bank-like $9 billion loss for the second quarter, fall 15%, and GM fell 11%. By comparison, the Dow Jones (Post-)Industrial Average fell 283 points, or 2.4%.

These large single-day drops are indicative of the virtual free-fall in U.S. banking stocks over the last year, as losses once considered unthinkable have now become routine, and the realization dawns among the population that the Greenspan bubble has popped, and taken the banking system with it. Bear Stearns and IndyMac Bank are but the vanguard of a wave of bank failures to come.