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

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CHICAGO — Wall Street’s meltdown Monday 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 blowouts 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,” Hummer said.

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 — a 504-point plunge — since it lost 684.81 points on Sept. 17, 2001, the first day of trading after the Sept. 11 attacks.

It was also the sixth-largest point drop in the Dow, just behind the 508.00 it suffered in the October 1987 crash.

Asian stock markets also tumbled today. Japan’s benchmark Nikkei 225 index closed down 5 percent to 11,609.72, a level not seen since July 2005, while Hong Kong’s blue-chip Hang Seng Index shed 5.7 percent. Both markets — Asia’s two biggest — had been closed for holidays on Monday, when news first broke about the dramatic events on Wall Street.

President Bush tried to calm the waters Monday, using a White House visit by Ghana’s president to tell the nation his administration is working to contain Wall Street’s problems.

“As policymakers, we’re focused on the health of the financial system as a whole. In the short run, adjustments in the financial markets can be painful, both for the people concerned about their investments and for the employees of the affected firms,” Bush said. “In the long run, I’m confident that our capital markets are flexible and resilient, and can deal with these adjustments.”

Wall Street’s woes seem sure to make it harder to get a home mortgage or car loan in the near future. But one silver lining for consumers is that oil prices fell $5.47 a barrel Monday to $95.71.

Gasoline prices are likely to fall sharply in the weeks ahead, and inflation, which eats away at spending power, is also likely to ease as energy prices fall.

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.

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 a while.”

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,” said Brandt, president of Development Specialists financial consultancy in Chicago.

What’s ahead?

For the U.S. government: After bailing out the Bear Stearns trading firm and mortgage giants Fannie Mae and Freddie Mac, the government finally shut its wallet. That drew applause from those concerned about “moral hazard,” the idea that shielding someone from risk makes them all the more reckless.

However, the Fed also expanded its role as lender of last resort, and today its policymaking arm will meet to consider whether to cut short-term interest rates to aid the economy.

For those on the sidelines: Few Americans have a direct connection to the events unfolding on Wall Street, but practically everyone has a stake in the game. The unwinding of Lehman’s credit-default swaps may seem irrelevant to most people, for instance, but ultimately could hurt the mutual funds in their 401(k)s.

A local institution such as Chicago’s ShoreBank, which has no counter-party exposure to Lehman and owns none of its debt, may do business with other banks taking a hit from the bankruptcy, said Oser.

“Everything’s connected to everything else,” he said.

Additional information from The Associated Press and McClatchy Newspapers