It was the first full day of business in the post-bailout economy, and it looked as though things hadn't been fixed.

As California state officials and other borrowers scrambled for cash, fears of a global credit crisis sent the stock market into a harrowing skid Monday. The Dow Jones average fell 800 points early in the day before partially recovering, finishing below 10,000 for the first time in nearly four years. Markets plunged across Europe and Asia, too, suggesting the dismal economic outlook was spreading from the United States to the rest of the world.

Across the Sacramento region, businesses and governments fretted over a credit crunch that showed no signs of improvement, even though Congress had approved the $700 billion rescue plan for the financial markets on Friday. Analysts said the message was that the rescue plan might eventually unclog the credit markets but probably won't provide instant relief.

Of all the nervous borrowers out there, perhaps the most visible is the state of California. The state is looking at backup plans in case it is unable to conduct a crucial $7 billion bond sale next week.

The bond sale represents a routine borrowing to cover seasonal cash-flow needs, but "of course, in 2008 nothing has been routine except turmoil and upheaval," said Tom Dresslar, spokesman for California Treasurer Bill Lockyer. "We don't at this point have a good sense of whether the adoption of that (bailout) plan is going to produce the needed thaw in the credit markets."

Looking for alternate sources of cash, the state is exploring loans from the U.S. Treasury or the state's two public pension funds, CalPERS and CalSTRS. Another possible backup plan: a smaller bond sale next week, perhaps $3 billion or $4 billion.

The state needs $1.5 billion by Oct. 29 or it could run out of cash, according to Controller John Chiang.

Marilyn Cohen, president of government-bond firm Envision Capital Management Inc. in Los Angeles, said she believes the state can get the bond deal done. But it's far from a certainty.

"The market is in trouble, which means getting an issue done is problematic," she said.

She said the turmoil on Wall Street suggests the rescue plan, while helpful, will take time to work. The plan calls for the U.S. government to buy up to $700 billion worth of troubled mortgage-backed securities from big commercial and investment banks. With those bad loans off their books, the idea is that those lenders can resume the flow of credit.

"You've got to give this time," Cohen said. "You've still got tons and tons of problems, hundreds of billions of dollars of toxic securities that need to be extricated from the balance sheets of big banks. Things are not going to get liquid again until they can see their way clear to get rid of some of this stuff."

In the meantime, businesses and individuals continue to suffer, too. The collapse of the housing market has wiped out home equity and erased billions of dollars in wealth in California and greater Sacramento, creating untold hardship throughout the region. As of late afternoon, 39 new bankruptcies had been filed Monday in U.S. Bankruptcy Court in Sacramento. The court covers a 23-county area.

In Elk Grove, one of the hardest-hit communities in the region, a longtime business folded over the weekend: Elk Grove Brewery & Restaurant in the Old Town business district.

While the brewpub was hurt initially by extensive construction in the neighborhood, which curbed access to the site, ultimately the economy put the business under.

The Correa family, which bought Elk Grove Brewery & Restaurant in 2003, had to "turn it over to the bank and walk away, unfortunately," said the brewpub's attorney Matthew Eason.

The brewpub was hurting long before the credit crunch became front-page news. But the lack of financing is crippling those businesses that are trying to get off the ground.

Capital Funding, a North Highlands nonprofit that makes business loans, said it's becoming increasingly tough to get deals funded. The firm teams up with commercial banks to arrange loans backed by the Small Business Administration.

"Across the board, fewer deals are being done, nationally, locally," said Dennis Funkhouser, credit manager at Capital Funding.

He said two industries in particular are finding it difficult to borrow: health clubs and hotel-motel developers.

Credit is drying up for health clubs because lenders are nervous about businesses that depend on discretionary spending, he said. Hotels are problematic because the weakening economy is hurting travel.

"There's concern about travel, vacations – will there be people out there at $4 a gallon gas, will families be going out on vacation? You wonder what the occupancy is going to be," he said.

Actually, gasoline has fallen to a statewide average of $3.60. The slumping economy has driven crude oil down to $87.81 a barrel, down 40 percent from its July peak of $147.

But that was about it for the good news. Unease about the spreading credit crisis made for a chaotic day on Wall Street. After falling 800 points, the Dow staged a late rally and closed with a loss of 369.88 points, to 9,955.50. European and Asian markets also struggled after European governments rushed to guarantee bank deposits and prop up troubled banks.

Joe Milam, a Roseville money manager, said the big sell-off amounted to "capitulation" on the part of many investors.

Yet Milam said stocks were becoming an attractive buying opportunity for investors willing to be patient.

"Unless capitalism is dead … things are being offered today at reasonable deals," said Milam, president of Legacy Capital Management Inc.

Call The Bee's Dale Kasler, (916) 321-1066.