The Dow Jones Industrial Index (DJI) got whacked for 504 points (4.42%) today, as the fallout from Wall Street’s crisis pummeled financial markets.

The index closed trading at 10,917.5, the lowest point since July, 2006. Lehman Brothers (NYSE:LEH, 94%) and AIG (NYSE:AIG, 61%) were the biggest losers of the day. Meanwhile, Merrill Lynch (NYSE:MER), which sold itself to Bank of America (NYSE:BAC) saw big early gains wiped outin afternoon trading.

The Dow lost 164 in the last half hour of trading in New York, which sends a bad signal for tomorrow’s opening.

All eyes are on the drama being played out on Wall Street today. But the cause of all the bloodshed was the downturn in the US housing market. This left banks and financial institutions with exposure to toxic subprime loans with a load of worthless securities on their books. This led to writedowns and losses. And the rest is history. Shockingly, given the scale of the crisis, John Maudlin says the housing crisis has a ways to run yet. Alt-A mortgages may the next to fall…

– There’s no other story this morning. Three seismic events have shaken Wall Street.

– Struggling brokerage giant Lehman Brothers (NYSE:LEH) filed for Chapter 11 bankruptcy early this morning after the federales refused to bail it out of trouble. Financial bellwether Merrill Lynch (NYSE:MER) sold itself to Bank of America (NYSE:BAC) for $44 billion. Insurance behemoth AIG (NYSE:AIG) is today scrambling for cash to save its own skin after its stock plummeted by a whopping 31% on Friday. AIG has reportedly asked the Fed to lend it $40 billion.

Losses of $500-$600 billion are enough to make anyone shudder. But Charles Delvalle says these estimates don’t come close to measuring the eventual fallout of the current credit crisis.

Credit losses could reach $2 trillion. That translates to $10 trillion of liquidity wiped out, using a very conservative estimate of leveraging (Lehman Bros (NYSE:LEH) had a leverage ratio of over 30 last year).

Charles says we could be entering the biggest deflationary period since the Great Depression. The best protection lies in top grade corporate bonds.

Former hedge fund manager Shah Gilani says corporate assets can be accounted for in multiple ways, at the discretion of management. And this makes comparative analysis nearly impossible. Shah says understanding these tricks is crucial to finding out the true state of any bank’s finances.

In a move to reassure spooked investors and curtail a crisis of confidence, Lehman Brothers Holdings Inc. (NYSE:LEH) moved up its third-quarter fiscal earnings release to early yesterday morning, says Jennifer Yousfi in Money Morning.

To gauge the depth and duration of this credit crisis you need to understand how banks use accounting methods to shore up their balance sheets. Former hedge fund manager Shah Gilani says banks use a whole host of tricks and sleights of hand to create the illusion that things aren’t as bad as they really are. Shah says this deception will only prolong the crisis on Wall Street…

The government’s bailout of Fannie Mae (NYSE:FNM) and Freddie Mac (NYSE:FRE), along with the collapse of Bear Stearns, has profoundly changed Wall Street.

One of the many problems with the government’s multi-billion-dollar welfare for Wall Street program, says Chris Mayer, is it has given Fannie and Freddie distinct advantages over purely private sector companies.

Chris says that, apart from the government’s backing of the obligations carried by Fannie and Freddie, these newly nationalized GSE enjoy a number of other less well known advantages…

Once the fourth largest Wall Street investment bank, Lehman Brothers (NYSE:LEH) has seen its market capitalization shrink from over $47 billion at its stock’s 52-week high of $67.73 down to just $5.4 billion at today’s new 52-week trading low of $7.64 per share.

Kerry Killinger yesterday (Monday) was ousted from his position as Chief Executive Officer of Washington Mutual Inc. (WM), the biggest U.S. savings and loan, after a ceaseless torrent of mortgage-related losses resulted in a 90% decline in WaMu stock.