AIG's ratings cut by S&P and Moody's threatens its existence

American International Group Inc.'s credit ratings were downgraded by Standard & Poor's and Moody's Investors Service, threatening efforts to raise emergency funds to keep the company afloat. AIG Chief Executive Officer Robert Willumstad has tried to raise cash to prevent the cuts, which may trigger more than $13 billion in collateral calls from debt investors who bought swaps, the insurer said in an Aug. 6 filing. AIG's shares plunged 61 percent yesterday in New York trading, dragging the company's market value to $12.8 billion. ``I don't know of a major bank that doesn't have some significant exposure to AIG,'' said Kenneth Lewis, chief executive officer of Bank of America Corp., in a CNBC interview. An AIG collapse would ``be a much bigger problem than most that we've looked at,'' he said.

European Union officials regard the dollar's advance against the euro as welcome respite for their economies at a time when several countries are close to a recession, according to a draft of an internal EU document. ``Excessive volatility on exchange-rate markets is undesirable for economic growth,'' ministers from the 27 EU nations said in the document, which was agreed to three days ago at a meeting of finance ministers and central bankers in Nice, France. ``The recent re-appreciation of the U.S. dollar vis-a-vis the euro and other European currencies is welcome,'' according to the draft. ``The depreciation of the euro is welcome even if the euro remains overvalued,'' Luxembourg Finance Minister Jean-Claude Juncker, who chairs the group of counterparts from the euro region, said on Sept. 12 in Nice. The EUR/USD is currently trading at $1.4250 as of 8:27am GMT.

The British pound fell against the dollar and snapped an eight-day gain versus the euro before a government report that may show inflation accelerated last month to more than double the central bank's target. ``Inflation is going to spike and then come down and that is going to allow the Bank of England to cut interest rates soon,'' said Neil Mellor, a currency strategist in London at Bank of New York Mellon Corp. ``We are going to see sterling cede further ground.'' The GBP/USD is currently trading at $1.7921 as of 8:30am, GMT.

Today's Economic Events