Economics may be the dismal science, but the third-quarter of 2008 has been one of high economic drama. The ongoing financial crisis that claimed investment bank Bear Stearns in the first quarter of 2008, and that has roiled markets all year, accelerated to force Lehman Brothers into bankruptcy, put mortgage lenders  Fannie Mae and  Freddie Mac into U.S. government conservatorship, force distressed insurance behemoth  AIG to take an $85 billion cash infusion from the government, and led to a rocky debate over a $700 billion rescue plan proposed by Treasury secretary Henry Paulson. Additionally,  Bank of America purchased  Merrill Lynch, including its army of 16,000 retail brokers, while the last two remaining large, independent investment banks,  Morgan Stanley and  Goldman Sachs, elected effectively to become regulated commercial banks with the result being that they won't be able to operate with as much leverage as they did previously.

The market whipsawed as the bailout package faced challenges in the House of Representatives late in the quarter. The Morningstar U.S. Market Index shed about 10% during the quarter and is off about 19% for the year.

As stocks have pulled back, bonds held up. The Morningstar Core Bond Index rose about half a percent during the quarter, and is up 1.7% for the year. Government bonds, in particular have surged, as investors have sought their safety amid the turbulence. For the latest updates on the continuing financial crisis, check out Morningstar.com's crisis center.

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