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Dow falls below 9,000; AIG gets more loans

Posted October 9th, 2008 by RonShimshock

Are we starting to reach a snowball effect with the stock market?  Today the Dow Jones Industrial Average fell below 9,000 for the first time in five years.  The primary driver of the recent drop was an announcement by Standard & Poor's Services that General Motors will be put under review to determine if its credit rating should be cut.

http://biz.yahoo.com/ap/081009/wall_street.html

S&P also put Ford Motor Co. on credit watch negative.  They said GM and Ford have adequate liquidity now, but their situation could change in 2009.

Quote:
"The story is getting to be like that movie 'Groundhog Day,'" said Arthur Hogan, chief market analyst at Jefferies & Co. He pointed to the still-frozen credit markets, and Libor, the bank-to-bank lending rate that remains stubbornly high despite interest rate cuts this week by the Federal Reserve and other major central banks.

Not to be lost in the shuffle, there are growing concerns about the health of AIG.  The Federal Reserve announced AIG will be receiving another $37.8 billion in loans, to be added to the $85 billion previously approved.

http://biz.yahoo.com/ap/081009/aig_loan.html

Quote:
The bottom line is, they need more liquidity than they thought," said Mark Lane, an analyst for William Blair & Co. The new loan is on top of a two-year, $85 billion loan AIG received last month from the Fed in an effort to stay in business.

Should we really be surprised by this?  Is there ever a time the government has a plan that comes in on-budget or underbudget?  A loan extension of $37.5 billion is not a trivial increase, but I guess given how much money has already been doled out, this is a drop in the bucket.

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