NEW YORK - Wall Street plunged again Wednesday as anxieties about the financial system ran high after the government's bailout of insurer American International Group Inc. and left investors with little confidence in many banking stocks. The Dow Jones industrial average lost about 450 points, giving it a shortfall of more than 800 so far this week.
As investors fled stocks, they sought the safety of hard assets and government debt, sending gold, oil and short-term Treasurys soaring.
The market was more unnerved than comforted by news that the Federal Reserve is giving a two-year, $85 billion loan to AIG in exchange for a nearly 80 percent stake in the company, which lost billions in the risky business of insuring against bond defaults. Wall Street had feared that the conglomerate, which has extensive ties to various financial services industries around the world, would follow the investment bank Lehman Brothers Holdings Inc. into bankruptcy. However, the ramifications of the world's largest insurer going under likely would have far surpassed the demise of Lehman.
"It's like banging on a big gong," Bernard McSherry of Cuttone & Company told CBS News business correspondent Anthony Mason. "It reverberates for a while. And we're dealing with that reverberation right now. And we're getting these waves for very uncomfortable feelings in our stomach."
He said the anxiety gripping the markets reflects investors' concerns that AIG wasn't able to find a lifeline in the private sector and that Wall Street is now fretting about what other institutions could falter. Over the past year, companies including Lehman and AIG have sought to reassure investors that they weren't in trouble, but as market conditions have worsened the market appears distrustful of any assurances.