With all due respect, you are both wrong. This is far more then a correction. The government is putting together a humongous bailout(that's been all over the news today). Free, the market was up on news of this bailout, however this bailout is a HUGE risk to taxpayers. The gov. is GUARANTEEING money markets and repackaging mortgage debt instruments. OUr government is essentially buying up bad debts. :oThis is all very substantial and unusual measures. It is not merely a 'correction'.
As a side note, Obama supports this plan. That alone would make me a little wary seeing as he also supported the 'plan' that lead to the downfall of some of these institutions to begin with.
`Real Difference'
Congressional leaders who met with Paulson and Bernanke late yesterday in Washington said they aim to pass legislation soon to shore up banks. The Fed said it will lend to banks to meet demands for redemptions from money-market mutual funds and will buy debt of the largest mortgage-finance firms, Fannie Mae and Freddie Mac, from primary dealers to spur liquidity.
``We're talking hundreds of billions,'' Paulson said in a press conference. ``This needs to be big enough to make a real difference and get to the heart of the problem.''
Options U.S. officials are considering include establishing an $800 billion fund to purchase so-called failed assets and a separate $400 billion pool at the Federal Deposit Insurance Corp. to insure investors in money-market funds, said two people briefed by congressional staff.
The Treasury sold $60 billion in cash management bills, for the second day in a row, to allow the Fed to continue to pump emergency cash into the financial system.
`More Issuance'
The U.S. may have to borrow an extra $700 billion to $1 trillion to fund the rescue of the financial system, according to Barclays Capital Inc.'s Michael Pond.
http://www.bloomberg.com/apps/news?pid=20601110&sid=azZFO8kdLYa0We are basically taking out debt to cover the asses of banks and save them from financial collapse. A correction normally happens without unusual measures. This is a very costly and unusual measure that is being undertaken. BTW, what all that means is WE as a country are taking out debt in order to cover the mess of some very large financial firms that because of their size could send us into a depression if not addressed. And we will need to take out even more debt until it is done. Taxes will be going up to cover this my friends, of that I can assure you. I almost want Obama to win now so he gets saddled with having to raise them.
Of course the markets are happy about this. Gov is stepping in to save the day. Should be interesting to see at what costs.