Thursday, September 18, 2008

Fear grips the market

The Federal Reserve gave a two-year, $85 billion loan to American International Group Inc. (AIG) in exchange for a nearly 80 percent stake in the insurer. Wall Street had feared that the conglomerate, which has its tentacles in various financial services industries in 130 countries around the world, would follow the investment bank Lehman Brothers Holdings Inc. into bankruptcy.

However, Wall Street stumbled again even after the government bail out.
"People are scared to death," said Bill Stone, chief investment strategist for PNC Wealth Management. "Who would have imagined that AIG would have gotten into this position?"

He said the fear gripping the market reflects investors' concerns that AIG wasn't able to find a lifeline in the private sector and that Wall Street is now fretting about what other institutions could falter.

The two independent Wall Street investment banks left standing — Goldman Sachs Group Inc. and Morgan Stanley — remain under scrutiny, as does Washington Mutual Inc., the country's largest thrift bank.


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