Stocks Sink After AIG Bailout, Fed Will Auction Debt

11:00 Market Indexes

30 industrials 10835.44 down 223.58 or -2.02 percent
20 transportation 4877.16 down 153.66 or -3.05 percent
15 utilities 436.73 down 10.77 or -2.41 percent
65 stocks 3910.73 down 97.50 or -2.43 percent

Treasury announces debt auctions for Fed

WASHINGTON (AP) - The Treasury Department has announced that in an effort to help the Federal Reserve deal with unprecedented borrowing needs resulting from the current credit crisis, it will begin auctioning debt for the central bank.

Treasury officials said that the new program would be part of the normal auctions it conducts to finance the government's budget deficits, which have been soaring because of the current economic slump.

Treasury officials did not provide any immediate details on the amount of debt that it will sell for Treasury or how often such sales will occur.

Wednesday trading gets off to a slow start

NEW YORK (AP) - Stocks are tumbling again, with investors still anxious even after the government bailed out American International Group Inc. and Barclays PLC bought a chunk of Lehman Brothers.

While the moves lift some of the uncertainty surrounding two of the most precarious pillars of the U.S. financial system, investors' anxiety is far from erased.

The two Wall Street investment banks left standing - Goldman Sachs Group Inc. and Morgan Stanley - remain under scrutiny. And the troubles in banking could exacerbate the problems facing the U.S. Economy.

Meanwhile, the Commerce Department says housing starts fell by 6.2 percent in August to the slowest building pace since January 1991.

In early trading, the Dow Jones industrial average is down 203 points at the 10,855 level.

Stocks may have to factor in housing data

NEW YORK (AP) - U.S. stocks are heading for a lower open after the government said new home construction fell by more than expected last month.

The report adds to worries about the U.S. economy that have been heightened by an upheaval in the financial sector. The government has bailed out the insurer American International Group Inc., while Barclays PLC has bought a chunk of Lehman Brothers.

Construction of new homes and apartments fell by a larger-than-expected amount in August, pushing activity to the lowest level in 17 years.

The data illustrate the country remains in the grips of a severe housing downturn that has triggered billions of dollars of losses and is reshaping the structure of U.S. Finance.

The decline is larger than the 1.6 percent drop analysts expected and showed weakness in all the country except the West.

Current account trade deficit rises to 183.1 billion dollars

WASHINGTON (AP) - The deficit in the broadest measure of American trade widened in the spring, reflecting a big jump in the country's foreign oil bill.

The Commerce Department says the current account trade deficit increased by 4.3 percent to 183.1 billion dollars in the April-June quarter, compared to a revised deficit of 175.6 billion dollars in the first quarter.

The current account is the broadest measure of America's dealings with the rest of the world because it includes not only trade in merchandise and services but also investment flows. The deficit represents the amount of money the country is borrowing from foreigners.

Mixed day on the Asian markets

HONG KONG (AP) - Asian stocks turned in a mixed performance today.

They gave up early gains as the 85 billion dollar plan to rescue troubled insurer AIG failed to persuade many investors that financial turmoil will soon ease.

European shares were higher in early trading.

Japan's Nikkei 225 average added 1.2 percent after sinking nearly 5 percent the day before to its lowest finish in more than three years.

South Korea's Kospi climbed 2.7 percent and Taiwan's benchmark rose 0.8 percent. But Hong Kong's blue-chip Hang Seng Index dropped 3.6 percent for its worst close in almost a year.

Benchmarks in Shanghai and Australia also finished lower.

McCain divided over $85 billion bailout for AIG

GUSTAVUS, Ohio (AP) - Republican presidential candidate John McCain isn't saying whether he supports or rejects the government's 85 billion-dollar bailout plan for the giant insurer AIG.

McCain told ABC's "Good Morning America" that he didn't want to bail out American International Group, the nation's largest corporate insurer. Yet he said millions of people whose finances were tied up in the company were in danger of having their lives destroyed.

Before the bailout was announced, McCain had said flatly that he would not support a bailout of AIG or any other company.

In his remarks to ABC, McCain blamed greed, excess and corruption for AIG's problems. He also said that Congress and federal regulators had paid no attention to the problem.

(Copyright 2008 by The Associated Press. All Rights Reserved.)

The Federal Reserve saved AIG, the insurance company that backed failed credit swap instruments. CBS News Jeff Glor reports and Harry Smith talks to business journalist Liz Claman during Wednesday's The Early Show: