Meltdown likely to reverberate

CHICAGO - Wall Street's meltdown sent the stock market reeling and left Main Street with one sobering thought: It isn't over yet.

The record bankruptcy filing of Lehman Brothers on Monday and fire sale of Merrill Lynch to Bank of America raised the specter of further blow-outs threatening the stability of an already battered financial system in the months ahead.

Unlike a stock market crash that hits all at once, the "agonizing and deep-seated" drumbeat of trouble seems certain to drag on, said market veteran Phil Hummer of Chicago's Wayne Hummer Investments. "I don't see a snap back. I've been hoping we would see the turning point, but I think it could be a long, long process."

The latest takedown of storied names in American business sparked a guessing game about which remaining financial giant would falter next. Those fears touched off the biggest drop in the Dow Jones industrial average since 2001 - a 504-point plunge. Investors targeted giant insurer AIG and savings-and-loan Washington Mutual, both down sharply in Monday's feverish session.

Why the meltdown at once-great firms? Too much debt, inattention to risk and leaders who failed to keep track of their operations, said James Tyree, head of Mesirow Financial in Chicago. "I see continued turmoil in general in the financial markets," he said. "These are the inevitable results of excess."

Measuring the depth of the crisis is no easy task, and uncertainty is likely to remain about how far the market and economy will sink as the debt crisis continues to unfold. "There is so much debt - individual, government and corporate debt - it just grew and grew and grew," said David Oser, chief economist at ShoreBank in Chicago. "The best you can hope for is that we're at the bottom to stay for awhile."

Ultimately, the financial industry's troubles will contribute to higher jobless rates, sluggish retail sales and what turnaround expert William Brandt calls "a nice, long slowdown in the economy."

"There will be more bank failures, more retail failures," predicted Brandt, president of the Development Specialists financial consultancy in Chicago. "We're looking at a tough 2009."