On Wall Street the Standard & Poor's 500-stock index fell nearly 3 percent, and the Dow Jones industrial average fell 387.18 points, or 2.8 percent. Stocks in Latin America fell as much or more than they did in New York.
Following the US stock fall, the Nikkei 225 index fell 448.64 points, or 2.61 percent, during the morning session on the Tokyo Stock Exchange. Huge losses on packages of American home loan securities unexpectedly jolted French and Dutch banks yesterday.
As Charles P. Kindleberger put it in his classic 1978 book: Manias, Panic, and Crashes.
"The implosion of an asset price bubble always leads to the discovery of frauds and swindles. The supply of corruption increases in a pro-cyclical way much like the supply of credit. Soon after a recession appears likely the loans to firms that were fueling their growth with credit declines as the lenders become more cautious about the indebtedness of individual borrowers and their total credit exposure. In the absence of more credit, the fraud sprouts from the woodwork like mushrooms in a soggy forest. "