by Robert Hyder
When American International Group (AIG) posted its nearly $62 billion loss for the fourth quarter of 2008, the Dow Jones tumbled 205 points (2.9%), just over two hours into Monday’s trading session. The $62 billion fourth-quarter loss, the largest loss in United States history, is part of AIG’s reported $99 billion loss for 2008, after reporting a profit of $9.3 billion the year prior.
At its lowest point in nearly 12 years, AIG pulled the stocks of several major banks along for the downward ride. For the third time, the federal government is revising the bailout of AIG in an effort to keep the company from collapsing, and thus contaminating the entire financial market, including the already distressed housing market.
In exchange for cumulative preferred stock, the federal government will commit another $30 billion to the insurance giant. The Treasury Department and the Federal Reserve said, “Given the systemic risk AIG continues to pose and the fragility of markets today, the potential cost to the economy and the taxpayer of government inaction would be extremely high.”
Stocks were expected to continue to fall today, on the heels of Friday’s announcement by the federal government to control as much as 36% of Citigroup’s common stock. The Citi news, in addition to a report that reflected America’s economy shrank at its swiftest pace in 26 years during the fourth quarter of 2008, it’s no wonder today’s AIG announcement has pushed the Dow to it’s lowest trading level since April 1997.
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