Investors on Monday sent stocks on a dive not seen since December 2008. The Dow Jones Industrial Average closed on Monday down 634 points, or 5.55%, from where it opened. That's after a drop last week of 698 points. After flirting earlier this year with a nearly full recovery from the Dow's Great Recession low point, the DJIA closed up a more modest 65% from the March 2009 low yesterday. Investment losses drained cash from not-for-profit hospitals during late 2008 and 2009 and was one reason for aggressive efforts to curb hospital spending, including wage freezes, layoffs and construction delays.
On Monday, a small number of hospitals saw the source of credit guarantees for short-term bonds downgraded. Federal Home Loan Banks with AAA ratings were downgraded to AA+ along with the federal government.
In 2008, Congress temporarily allowed the Federal Home Loan Banks to extend credit backing to hospital borrowers as one remedy for shaky credit markets. That allowed hospitals with credit guarantees from faltering commercial banks to add the highly rated backing of Federal Home Loan Banks. Investors rely on the strength of credit guarantees as insurance; interest rates increased when banks stumbled. (Banks became the primary sources of credit backing after exposure to subprime mortgage toppled bond insurance companies.)
You can follow Of Interest on Twitter @MHmevans.