The Dodd Drop

Last fall, Senator Chuck Schumer opened his big mouth and caused a run on Indy Mac. If you think about it, there was some nervousness over the subprime mess, but Schumer pushed people over the edge. That really was the start of the banking crisis we have today.

You would’ve thought our elected royalty learned by that incident…

U.S. stocks took a cue from overseas markets, where European and Asian indexes suffered major losses on fears that the rapid deterioration of the global economy has left many of the world’s major banks at a point where only government takeover can preserve them.

That sent U.S. stocks plummeting at Friday’s opening, and the rout gained momentum at mid-day when Senate Banking, Housing and Urban Affairs Committee Chairman Christopher J. Dodd said during a Bloomberg television interview that the United States may have to temporarily take over some banks.

“I’m concerned that we may end up having to do that, at least for a short time. I don’t welcome that at all, but I could see how its possible it may happen,” said Mr. Dodd.

The Connecticut Democrat’s remarks spurred a 253-point dive by the Dow, which had already fallen to levels not seen since 2003. It was led by huge drops in the stocks of major banks including Wells Fargo, Citigroup and Bank of America. At one point, megabank stocks like Citigroup and Bank of America plunged into the $1 to $2 range as investors dumped shares in fear that a government takeover would render their stock holdings worthless.

Anyone for a Capitol Hill gag rule?