Stocks Tank After Wall Street Shake-Up

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NEW YORK - A stunning makeover of the Wall Street landscape sent stocks falling precipitously Monday, with the Dow Jones industrials sliding 500 points in their worst point drop since the September 2001 terrorist attacks. Investors reacted badly to a shakeup of the financial industry that took out two storied names: Lehman Brothers and Merrill Lynch Co.

Stocks also posted big losses in markets across much of the globe as investors absorbed Lehman's bankruptcy filing and what was essentially a forced sale of Merrill Lynch to Bank of America for $50 billion in stock. While those companies' situations had reached some resolution, the market remained anxious about American International Group Inc., which is seeking emergency funding to shore up its balance sheet. A faltering of the world's largest insurance company likely would have financial implications far beyond that of Lehman, the largest U.S. bankruptcy.

The swift developments that took place Sunday are the biggest yet in the 14-month-old credit crises that stems from now toxic subprime mortgage debt. For the first part of Monday's trading, the market was falling, but in a largely orderly fashion as investors seemed to draw some relief from the resolution of Lehman's problems.

But as the session wore on, and there was no word about AIG, the market's suffered another bout of fear that the ongoing credit crisis will continue to devastate the financial sector, and selling accelerated in the final hour. Selling then took on more momentum as stock indexes broke through levels seen at the market's earlier lows in July, an ominous sign for some traders.

Veteran trader Art Cashin told CBS News correspondent Anthony Mason that he believes there could be more casualties:

"This is the fifth time we've seen this movie. And you sit on the edge of your seat and yell at whichever character it is: 'Don't go into that woodshed!' But they keep going in," Cashin said.

The stunning developments took place as voters, who rank the economy as their top concern, prepare to elect a new president in seven weeks. It likely will spur a much greater focus by presidential candidates - Republican John McCain and Democrat Barack Obama - and members of Congress on the need for stricter financial regulation.