Over the next several posts, I'll be monitoring, critiquing how an online story is updated throughout the day. My story is about the Federal Reserve rescuing American International Group with an $85 billion loan.
As of 8:07 AM, this is how the story read:
STOCKS TUMBLE AFTER GOVERNMENT BAILOUT OF AIG
By Madlen Read, AP Business Writer
NEW YORK – Wall Street plunged again Wednesday, with anxieties about the financial system still running high even after the government bailed out the insurer American International Group Inc. The Dow Jones industrial average dropped more than 250 points.
The Federal Reserve is giving a two-year, $85 billion loan to AIG in exchange for a nearly 80 percent stake in the insurer, after it lost billions in the risky business of insuring against bond defaults. Wall Street had feared that the conglomerate, which has its tentacles in various financial services industries around the world, would follow the investment bank Lehman Brothers Holdings Inc. into bankruptcy.
"We dodged a bullet, but we want to make sure it's a complete ceasefire," said Jack A. Ablin, chief investment officer at Harris Private Bank, noting that AIG still needs to unwind its investment positions, sell off assets, and possibly get more cash.
Furthermore, 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. Morgan Stanley revealed its quarterly earnings early late Tuesday, posting a better-than-expected 7 percent slide in fiscal third-quarter profit. It insisted that it is surviving the credit crisis that has ravaged many of its peers.
Lehman filed for bankruptcy protection on Monday, and by late Tuesday had sold its North American investment banking and trading operations to Barclays, Britain's third-largest bank, for the bargain price of $250 million. Over the weekend, Merrill Lynch, the world's largest brokerage, sold itself in a last-ditch effort to avoid failure to Bank of America Corp.
The ongoing troubles in the financial sector could exacerbate the problems facing the weak U.S. economy, given that individuals and businesses rely on the nation's money centers to borrow from.
The Commerce Department reported Wednesday that new home construction fell by 6.2 percent in August to 895,000 units, the slowest building pace since January 1991. Slumping demand for houses, sinking home prices and mortgage defaults have been the catalysts behind Wall Street's turmoil — and the risky mortgage-backed assets held by the nation's banks are not apt to regain in value until the housing market turns around.
A day after Wall Street regained some of Monday's nosedive, the Dow fell 346.69, or 3.13 percent, to 10,712.33. The blue-chip index is down more than 5 percent on the week, and has fallen more than 23 percent since reaching a record close of 14,164.53 on Oct. 9 last year.
Broader stock indicators also fell. The Standard & Poor's 500 index dropped 45.94, or 3.79 percent, to 1,167.66, while the Nasdaq composite index fell 82.37, or 3.73 percent, to 2,121.53.
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