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More record losses on local and international -

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More record losses on local and international markets

The World Today - Tuesday, 7 October , 2008 12:10:00

Reporter: Peter Ryan

ELEANOR HALL: But we begin today with the meltdown on the world's financial markets.

And the Australian share market plunged again today following the lead from the United States and
from Europe which had its biggest crash in 20 years.

As the market opened, the All Ordinaries Index fell as much as three per cent, amid escalating
fears that the much trumpeted bailout of the US financial sector won't prevent a deep global
recession.

On Wall Street overnight, the Dow Jones Industrial Average dived below the psychological barrier of
ten thousand points for the first time in four years.

And European share markets were left reeling from massive falls of a size not seen since 1987.

Business editor Peter Ryan reports.

PETER RYAN: For the second Monday in a row, it was Black Monday.

On Wall Street there was panic, as the Dow Jones Industrial Average plunged as much as 800 points.

Almost every stock in the S&P 500 was in the red, and the tech heavy Nasdaq dived more than four
per cent.

Volatility is the only certainty at the moment, with traders in serious doubt that the 700 billion
bailout plan to prevent a global recession.

Wall Street watcher Wayne Kaufman says there's no other way of describing today's events.

WAYNE KAUFMANN: We are right now experiencing a market crash, it's sort of slow motion compared to
87 or 29. In 87 there was a benchmark of you know the prior crash, now it seems like we don't
really have a benchmark because it's happening in slow motion.

The government right now is carpet bombing liquidity all over the place and it's not really
helping. This has to run its own course, I'm not sure exactly when that will be.

PETER RYAN: By the end of trade, the Dow Jones had staged something of a recovery, closing 3.5
percent lower.

Throughout the day the Treasury Secretary Hank Paulson and Federal Reserve chief Ben Bernanke met
to decide when and how to roll out the rescue plan.

They're also considering other ways to thaw frozen credit markets, with banks still hoarding cash
in fear and suspicion.

At the same time, President Bush was once again trying to convince investors that the US economy
will recover.

GEORGE W. BUSH: I believe in the long run this economy is going to be just fine, it's a resilient
economy, it's a productive economy with good workers. It's a, this is a reminder that we've been
through tough times before and we're going to come through this just fine.

PETER RYAN: Today's US plunge followed heavy falls in Europe which had its worst trading day in 20
years.

In Germany the DAX fell 7.5 per cent, France dived nine per cent and in London the FT100 plunged
7.8 per cent. As Britain's chancellor of the exchequer Alistair Darling tried to reassure
depositors that their funds were safe.

ALISTAIR DARLING: Our priority at home and abroad is to bring stability to the financial system to
ensure depositors and savers are protected and to defend the interests of the tax payer.

PETER RYAN: But that stopped short of the deposit guarantee that EU countries such as Ireland,
Germany, Denmark and Sweden have provided in recent days.

Justin Urquart Stewart of Severn Investment Management in London, says it's now critical that all
EU nations coordinate their rescue plans to restore confidence in the system.

JUSTIN URQUART STEWART: This is DEFCON 1 in the banking system, this isn't talking about individual
banks going down, this is actually talking about a fundamental failure in the system of capitalism.
This is now time for shilly shallying over different words, you need government support right the
way across.

PETER RYAN: The overnight tremors from Europe and the United States, threw the Australian share
market into an instant fall when trading opened this morning.

The All Ordinaries Index fell as much as three per cent, with banking and resource stocks taking
the biggest hits as expected.

But it could have been worse, according to David Landa of CMC markets.

DAVID LANDA: A lot of the selling that we've seen today has naturally come from the leads that we
received from the US and also the European markets overnight but at this stage at least, the
selling may not be quite as aggressive as may particularly been expected based on those leads.

PETER RYAN: Earlier today, back at the epicentre of the financial crisis, the chief executive of
Lehman Brothers, was being grilled by a congressional committee in Washington.

Democrat Henry Waxman was taking a close look at Richard Fuld's pay deal, in light of the Lehman
Brothers bankruptcy.

HENRY WAXMAN: You have a 14 million dollar oceanfront home in Florida, you have a summer vacation
home in Sun Valley Idaho, you and your wife have an art collection filled with million dollar
paintings, your former President Joe Gregory used to travel to work in his own private helicopter.

PETER RYAN: Richard Fuld defended the deal, though he did seem embarrassed at the number of zeros
involved.

RICHARD FULD: I think for the years that you're talking about here I believe my cash compensation
was close to 60 million which you have indicated here and I believe the amount that I took out of
the company over and above that was I believe a little bit less than 250 million. Still a large
number though.

HENRY WAXMAN: Still a large amount of money.

PETER RYAN: The continuing contagion is also engulfing commodities and currencies.

Oil fell below 90 US dollars a barrel with demand expected to ease in a recession.

And the Australian dollar dived seven per cent overnight to just under 70 US cents, ahead of
today's anticipated interest rate cut, and as strategists dump anything even mildly associated with
risk.

ELEANOR HALL: Business editor Peter Ryan.