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World Markets Plunge for Second Straight Day

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World stock prices are falling for a second straight day after Monday's bankruptcy of a major U.S. investment bank, Lehman Brothers. And investors continue to worry that the world's biggest insurance company is on the verge of collapse.

Insurance giant American International Group, is struggling to raise enough cash to stay in business.  Like many investment banks, AIG has been hit hard by the housing crisis.   

Major European stock indexes were sharply lower at midday, while key markets in Japan and Hong Kong had fallen around five percent at the close of trading.  And Russian officials suspended trading on their main (RTS) stock exchange after prices plunged more than 10 percent.

Meanwhile, central banks in Europe, Asia, and the United States are pumping millions of dollars into the financial markets to make it easier for them to continue functioning.

U.S. President George Bush said Monday that U.S. financial markets are strong and flexible enough to weather these problems in the long run.  Mr. Bush said officials are working to "reduce disruptions" in the meantime.

Mr. Bush spoke after the Lehman Brothers investment bank filed the largest bankruptcy in U.S. history.  The move followed crisis talks that failed to produce government financial backing for the company, which prompted potential buyers to walk away from the firm. 

Meanwhile, the Bank of America agreed to acquire troubled U.S. investment bank and brokerage firm Merrill Lynch for $50 billion. 

Investment banks arrange the sale of stocks and bonds for companies and often make major investments of their own. 

Some information for this report was provided by AFP, AP and Reuters.

 

 

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