The Federal Reserve splashed out a huge sum of 85 billions of U.S. dollars to bail out the beleaguered AIG. This gave the market a sigh of relief. Uncle Sam simply can't afford another giant to fall down.
The U.S. housing bubble's burst and the subsequent subprime mortgage crisis dragged the world's biggest economy into recession. More than that, Uncle Sam's financial system is now in deep trouble, making the whole world jittery.
From the collapse of The Bear Stearns Companies (one of the world's largest investment banks) in March 2008 to the fall of Lehman Brothers (filed for bankruptcy) and Merrill Lynch (being sold off to Bank of America on September 14, 2008), it shows how seriously the financial system in U.S. has been ruined by the toxin of the subprime mortgage loans.
When the subprime mortgage crisis first erupted in 2007, it was widely predicted the toxin would be pervasively spread out to impact the financial system at a magnitude not quantifiable.
The collapse of the three giants have not brought the storm to subside. The whole financial crisis is far from over.
There was a prediction at the start of the year that investors might see Dow Jones at 9,000 towards the end of the year. How probable is it? The trend now seems to be moving towards that direction.