The Dow ended the day down 370 points, after being down more than 800 in midafternoon. How can this be explained?

1. Pure random chance. As Nassim Taleb writes in Fooled by Randomness:

To be competent, a journalist should view matters like a historian, and play down the value of the information he is providing, such as by saying, "Today the market went up, but this information is not too relevant as it emanates mostly from noise."

That's it! That's my verdict: Today the market went down, but this information is not too relevant as it emanates mostly from noise. But then I read the next sentence in Taleb's book:

He would certainly lose his job by trivializing the information in his hands.

Hmmm. Don't want that to happen. Better come up with some other reasons.

2. Worries about the U.S. financial system have now become worries about the global financial system. And while the $700 billion bailout/rescue plan approved by Congress last week might have a significant impact in the U.S., everybody's worried about European banks now, and it's far less clear whether and how European countries will join together to do something similar.

3. Investors aren't entirely convinced Treasury's $700 bailout will work. They shouldn't be convinced.

4. Worries about the U.S. financial system have become worries about the U.S. economy and global economy. Pretty much everybody agrees now that we're headed into a global recession. That cuts into corporate profits, and that means stocks should go down.

5. Investors in most hedge funds aren't able to pull out their money whenever they want, and instead have to wait until the end of the quarter or year. Sept. 30 was the end of a quarter, investors presumably pulled lots of money out of hedge funds, and so lots of hedge funds have been forced into selling stock. Which has put a lot of downward pressure on the stock market.

6. Nothing the Fed, Treasury and foreign governments are doing is working, the global financial system will collapse, and we're all going back to being hunter-gatherers. That may be true, but if stock market investors really thought so the Dow would have dropped a whole lot more than 370 points.

7. Oh, and as for that big comeback in the last hour of trading: Maybe it had something to do with the price of oil dropping to $87.81 a barrel.

Former Fed Chairman Paul Volcker, former Fed Vice Chairman Roger Ferguson and former Bank of Israel Governor (and AIG vice chairman!) Jacob Frenkel had a little press conference this morning to discuss the structure of financial regulation or--more precisely, a report called The Structure of Financial Regulation (pdf; and it's just the press release, not the report proper, which doesn't appear to be available online yet--update: the report can be found here).

It's a product of Group of Thirty, a now 30-year-old club of former (and a few current) central bankers that occasionally issues reports like this. The report itself is timely, but not particularly newsworthy: It describes the financial regulatory structures in 17 different countries, and concludes that "the Integrated Model and the Twin Peaks Model may more rationally reflect the changes that have taken place in the financial business." The Integrated Model is where one regulator, like the Financial Services Authority in the UK, watches over everything. Twin Peaks is of course where FBI Special Agent Dale Cooper investigates the death of homecoming queen Laura ... No, sorry. Twin Peaks is where you have one regulator looking after the safety and soundness of financial institutions and another looking out out for the interests of consumers--which happens to be how they do it in Australia and the Netherlands.

The U.S. follows the Lots and Lots of Different Regulators at Different Levels of Government With Often Conflicting Priorities Model, which the Group of Thirty euphemistically labels The Exception.

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For the last few weeks the U.S. stock market has been a haven of relative calm in global financial markets. Seriously. I know it doesn't look calm, what with drops (and occasional increases) of 5+% becoming the order of the day. But instead of freezing up like credit markets, the stock market been functioning smoothly as investors assess and reassess the threat posed by the financial crisis. This morning their verdict has been to sell, especially financial stocks, as events over the weekend and this morning in Europe seemed to show that--$700 billion U.S. bailout bill act or no--there are still a lot of shoes to drop in this great global unwinding of leverage.

Lots of nonfinancial stocks dropped too, presumably on the growing conviction that we are entering into a global recession that will hit everybody's profits. And so the Dow this morning was back below 10,000 for the first time since 2004.

What makes it all stop? You've got me. It could end in some dramatic display of globally coordinated government action. I'm increasingly getting the feeling it's going to be with a whimper. When everybody gets more or less equally discouraged about the future of financial markets and the economy, we'll have hit bottom. But we won't know it at the time, and probably won't believe it until months after it has happened.