The stock market is down 230 points at 12:30 PM today, which could be a lot worse when you think about it. It's not every day where you see a major, long-entrenched Wall Street investment house collapse under the weight of its own bad credit bets.

That firm would be Lehman brothers, or Shearson-Lehman when I was trading in New York in the 1980's right out of college. I actually interviewed with Shearson-Lehman and the traders and brokers I talked to during that interview process were fairly unanimous in their opinion that the company was as conservative as they come. The word was that risky derivative bets (which were just taking off in the 1980's) wouldn't be green-lighted by Lehamn bosses.

What a difference 20 years makes. Now Lehman has gone under precisely because of its risky credit and derivative bets - and Uncle Sam is perfectly willing to let the Wall Street giant sink to the bottom of the sea. Unlike Bear Stearns six months ago, where U.S. Treasury Secretary Henry Paulsen and Federal Reserve Chair Ben Bernanke pushed for a bailout of Bear Stearns, the federal government has drawn the line.

Check this quote out from President Bush this morning and see if you can't read between the lines and figure out the days of milk, honey and federal government-engineered takeovers of failed investment banking giants are over.

"We are working to reduce disruptions and minimize the impact of these financial market developments on the broader economy," Bush said. "The policymakers will focus on the health of the financial system as a whole."

Translation? Go ahead and file for bankruptcy - and when the phone doesn't ring, you'll know it's us.

Even with that tough love message from the White House, the carnage isn't over yet, and until then, the tech sector will continue to suffer. As long as investment giants like Merrill Lynch (bought out by Bank of America); AIG (stock down 45%), Washington Mutual, Wachovia, et al, continue to shed money, the entire economy stands at risk.

All Uncle Sam can do is encourage big banks and investment firms to join together and flush the banking sector with enough cash to insure that loans can still be made and money can still be invested. To that end, a new consortium of 10 leading domestic and foreign banks, including Goldman Sachs, Citigroup, Barclays, and Morgan Stanley, agreed Sunday to create a $70 billion fund to lend to troubled financial firms. To further prime the lending pumps, the Fed, which meets tomorrow could cut the Fed Funds rate, a key short-term interest rate, from its present level of 2%. That should free up even more money for banks to lend and businesses to borrow.

When more money flows through the credit and lending systems, the tech sector should stabilize and take off again. As I've been saying, that process is going to take some time. Best guess is early 2009, when a new president is sworn in and "change" is in the air, or more likely in mid-2009 when the housing market is expected to begin to rebound and billions of dollars of equity filter into the U.S. economy.

Until then strap yourselves in - should be a hell of a ride.