AIG Reports Biggest Corporate Loss in History
Federal Reserve Chairman Ben Bernanke reported that the bailout of AIG has made him more angry than anything else in the recession. His comment followed on the heels of AIG reporting the largest loss in corporate history, a record $61.7 billion for Q4 2008 alone. Bernanke said that AIG took risks with unregulated products, like a hedge fund, while using cash from people's insurance policies. He said that the government had no choice but to bail it out to avoid the same kind of economic collapse that occurred when Lehman Brothers went bankrupt in September 2008.
What It Means to You
As a result of AIG's loss, the Dow fell nearly 300 points to close at 6763.29, the lowest close since April 25, 1997 when it closed at 6738.27. This means the Dow has now dropped below the low set in the last recession, which was 7197 on October 9, 2002. The Dow has now dropped over 50% from its all-time high of 14164, reached on October 9, 2007.
In addition, the market fell because investors panicked that:
- Obama's economic stimulus package will not be enough to stop the downward economic spiral.
- Citigroup requested a third installment of government aid.
- Warren Buffet's Bershire Hathaway posted its worst book loss in its history. (Source: Bloomberg, Stocks Drop Worldwide, March 2, 2009; Bernanke Says Insurer AIG Operated Like a Hedge Fund, March 3, 2009)
Comments
Had I known this 16 years ago I would have left my money in the bank. We have been investing since 1993 we put $163000.00 of our hard earned money into mutual funds that amount went down to $89000.00 any losses past 3 years you can not claim from income taxes.
I am just wondering how much money we could have in the bank had we had left it there at 4%? Governments should have to change the system that you can claim losses past the 3 years, and change this to 10 years?
Further to my comment above, these investment people have the guts to send us T3 slips that after a year of losing money they still find that we made $2500.00 what we have to declare as income. This is enough to faint.