In a conference call Wednesday morning, JPMorgan CEO Jamie Dimon told analyst Meredith Whitney, "If you are not fearful, you're crazy."
Wall Street investors, then, would appear to be sane. And terrified. The market rout continued Wednesday: The Dow Jones industrial average closed down more than 733 points, or about 8 percent. The S&P 500 did even worse, down 9 percent.
In New York, Federal Reserve chairman Ben Bernanke may have overdone it on the understatement front:
Stabilization of the financial markets is a critical first step, but even if they stabilize as we hope they will, broader economic recovery will not happen right away," Bernanke said today in a speech to the Economic Club of New York. "Economic activity will fall short of potential for a time."
And in the tell-us-something-we-don't-know department, the Federal Reserve released its "Beige Book" report on economic conditions Wednesday afternoon. Prognosis: Bad.
The gloomy report shows that regions across the U.S. have taken on a more pessimistic view about the economic outlook.
Most of the Fed's 12 regional banks reported that manufacturing has slowed and consumer spending has decreased.
Sure seems like a good time for a debate about Weatherman Bill Ayers, doesn't it?
UPDATE: Justin Wolf offers some additional, slightly calming, insight:
...A pretty convincing narrative thread for the day's events, and one that appears to be backed up by the individual stocks I looked at, is that today's market reaction was no longer about financial-system panic but about the reality of recession, possibly a pretty harsh one. The stocks of financial companies perceived last week to be at significant risk of some kind of less-than-friendly government takeover -- Morgan Stanley, Citi, Goldman Sachs -- are still much higher than they were last Friday. Pretty much every company on the stock market, though, was down today because of fears that the sharp slowdown in consumer spending hinted at in today's September retail sales report and Fed Beige Book means that earnings will be much lower in the quarters ahead.
Those fears are almost certainly justified. And they're kinda scary. But I'll take 'em any day over the fear that the banking system is about to shut down.