Stocks saw another sharp drop on Tuesday morning as worries mounted that the financial system was broken beyond repair. Investors poured money into bonds, and the yield on the benchmark 10-year Treasury note fell to a 5-year low
Next, several rock-solid money market funds began to falter, dipping below the $1 per share benchmark.
Meanwhile the Fed was scheduled to meet on Tuesday afternoon. Wall Street analysts, who just a week ago expected the Fed to hold rates steady, began to anticipate a rate cut. But the central bank chose not to succumb to panic and unanimously decided to hold rates steady at 2%
Markets cheered the decision, and the Dow jumped 140 points at the close
After the bell, British bank Barclays agreed to buy up $2 billion worth of Lehman's brokerage assets and real estate holdings, and Morgan Stanley reported better-than-expected earnings
But the big news came later that night when the government announced that it would stage a staggering $85 billion bailout of AIG
, and take an 80% stake in the company.NEXT: Wednesday, Sept. 17 - Another free fall