Markets rocked by financial firms Monday
NEW YORK, Sept. 15 (UPI) -- U.S. market indexes fall hard Monday as two Wall Street institutions and trouble at the county's largest insurance company sent U.S. markets tumbling.
The Dow Jones industrial average closed down 504.48 points to 10,917.51, off 4.42 percent.
The Standard & Poor's index was off 59.00 points, or 4.71 percent, to 1,192.70. The Nasdaq composite index was down 81.36, or 3.6 percent, to 2,179.91.
Lehman Brothers Holdings shares fell 95 percent after announcing it would file for Chapter 11. Merrill Lynch shares rose 22 percent after Bank of America said would purchase the firm for $50 billion.
Regulators said American Insurance Group could access $20 billion of its restricted money in the face of a financial crisis.
On the New York Stock Exchange, 170 stocks advanced and 3,048 declined on a volume of 1.432 billion shares traded.
The 10-year U.S. Treasury note rose 2 16/32 to yield 3.42 percent.
The dollar was mixed. The euro traded at $1.4242 against the dollar, compared with Friday's $1.4217, while the dollar traded at 104.83 yen from Friday's 107.87 yen.
In Tokyo, the Nikkei average gained 112.26 to 12,214.76, up 0.93 percent.
In London, the FTSE 100 index fell 212.50 points to 5,204.20, off 3.92 points.
AIG allowed to access $20 billion
NEW YORK, Sept. 15 (UPI) -- New York regulators decided Monday that American International Group can access $20 billion of its own money in the face of a financial crisis.
Insurance company assets are regulated to ensure policy holders are covered. But New York allowed AIG to "make a bridge loan to themselves," Gov. David Paterson said.
As the move was announced, AIG shares were already tumbling on Wall Street, falling nearly 50 percent in afternoon trading.
AIG, one of the biggest underwriters of complex debt deals known as credit default swaps, has appealed to the U.S. Federal Reserve for a massive loan in an attempt to avoid a credit downgrade that could result in bankruptcy, The New York Times reported Monday, citing anonymous sources.
AIG's desperate straits came to light during the weekend, when U.S. officials and Wall Street bankers were feverishly working to craft a rescue plan for New York investment bank Lehman Brothers, which was facing financial ruin from its exposure to the U.S. real estate credit crunch.
AIG's involvement in credit default swaps, which were dependent on a booming mortgage market, has forced it to raised $20 billion in financing this year to cover losses, the Times said.
Economist calls for Fed rate cut
LEXINGTON, Mass., Sept. 15 (UPI) -- Global Insight's chief U.S. financial economist called for an emergency cut in federal lending rates in response to the fall of Lehman Brothers Holdings.
New York investment bank Lehman Brothers announced Monday it would file for Chapter 11 bankruptcy protection.
"Without a very aggressive response from the Fed on rates, the threat to the financial system and the economy from further declines in asset prices is huge," Brian Bethune wrote in response.
Bethune wrote the lack of a direct federal bailout "is understandable" and the broadening of lending programs announced by major global banks "may help ease the shock."
However, "we should not delude ourselves into thinking that without a significant move from the Fed there will not be further tightening of credit conditions as a result of the events over the weekend," he wrote.
Absent a rate cut, there will be pressure on the U.S. Congress to respond with a move that would require taxpayer funding "and burden American households with additional government debt for years to come," he wrote.
Travel firms leave thousands stranded
LONDON, Sept. 15 (UPI) -- The collapse of two British travel businesses left thousands of travelers stranded in far-away destinations, officials said.
The Civil Aviation Authority moved to begin rescue operations for XL Leisure and Travel and K&S customers stranded in Turkey, Barbados and other tourist spots, The Daily Mail reported Monday.
CAA Director of Consumer Protection Richard Jackson called the rescue a "massive logistical operation."
The much larger company, XL, closed Friday and K&S abruptly closed Sunday, The Daily Mail reported.
XL customers in Barbados revolted when the hotel demanded they pay another $1,750 to continue staying at the hotel.
"The tour rep basically told us 'You're on your own'. The whole thing has been a disgrace and totally ruined our holidays," former policeman Derek Larkins told The Daily Mail.