As traders sold off stocks on the weekend's dour news, rumors began to circulate that AIG was struggling to raise enough capital to fend off a downgrade. As a result, New York Governor David Paterson bent intra-corporation lending rules, allowing the company to loan itself $20 billion from a subsidiary.
In the worst day on Wall Street in seven years, the Dow Jones industrial average tanked more than 500 points
after Lehman Brothers' epic collapse of the buyout of Merrill Lynch
By Monday night, AIG was in fact hit with a downgrade
, as Fitch bumped the insurance group down a notch. With $1.1 trillion in assets and 74 million clients in 130 countries, investors feared AIG's collapse would severely hurt consumers and further tighten already strangled credit.
Also Monday, news cropped up that the nation's largest savings bank, Washington Mutual was in search of a white knight.NEXT: Tuesday, Sept. 16 - The Fed steps in