Insurer American International Group struggled for survival a day after a financial tsunami overtook investment bank Lehman and forced the sale of rival Merrill Lynch in the biggest financial industry shake-up since the Great Depression.
AIG's struggles followed the failure of frantic attempts to find a rescuer for investment bank Lehman Brothers Holdings Inc , and Merrill Lynch & Co's agreement to be taken over by Bank of America Corp. The US Federal Reserve has hired investment bank Morgan Stanley to review options for AIG, which has lost some 90 percent of its value so far this year, a person familiar with the situation said on Monday.
Fearing a meltdown on Wall Street, the US presidential candidates sparred Monday over who could best restore financial health, with John McCain pledging reform and Barack Obama saying hands-off Republican policies were the problem.
US stocks fell sharply across the board, but not as much as some expected.
One of the biggest decliners was Bank of America, whose planned take-over of Merrill would allow it to surpass Citigroup as the country's largest bank by assets. "The concern for Bank of America is the debt that they are acquiring," said Marc Pado, US market strategist at Cantor Fitzgerald & Co in San Francisco. "Secondly, is it too big of a purchase? They are dealing with Countrywide right now. Did they need to be dealing with this as well?".
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