Wall Street Braces For More

(LA Times) With Wall Street already reeling from the demise of one storied investment firm and the rushed takeover of another, investors are bracing for more turbulence as the housing crisis continues to hammer the nation's financial system.

The Dow Jones industrial average plummeted 504 points Monday -- the most since the aftermath of the Sept. 11, 2001, attacks -- after investment bank Lehman Bros. Holdings Inc. became the biggest company to file for bankruptcy protection and Bank of America Corp. announced it was acquiring Merrill Lynch & Co.

The market's direction today could hinge in large part on what happens with insurer American International Group Inc. -- the latest financial titan struggling to stay afloat -- and on the outcome of a Federal Reserve meeting on interest rates.

Like Lehman and Merrill, AIG has recorded large losses on mortgage-related debt. Its stock price plummeted 61% on Monday as the company scrambled to borrow as much as $75 billion to tide it over.

And, as with Lehman, investors fear that a collapse of AIG would ricochet through the financial system and prompt another wave of selling in the stock market.

Mark Wahlstrom and Jan Schlichtmann discuss the turmoil in the financial sector and their impact on the settlement and broader markets in this video...

Comments

[Dentist Roseville]

It isn't surprising that more and more companies are heading this way due to the recent economic meltdown. I do hope though that the economies start to recover soon so as to be able to hire people out of work.