"Extinction-level event"

So my knowledge of the economy makes John McCain look like a University of Chicago Economics Professor, but the fact that the DOW fell 500 points yesterday, AIG's credit rating was downgraded, and that AIG is thus down another 62% this morning, all strike me as Very Bad Things.

This weekend we learned that, unlike Fannie Mae, Freddie Mac, and Bear Stearn's... Lehman Brothers was not too big to fail.

What about AIG? Search me, but they certainly sound important:

But there is a bigger potential failure lurking: the American International Group, the insurance giant. It poses a much larger threat to the financial system than Lehman Brothers ever did because it plays an integral role in several key markets: credit derivatives, mortgages, corporate loans and hedge funds.

Late Monday, A.I.G. was downgraded by the major credit rating agencies (which inexplicably still retain an enormous amount of power in the marketplace despite having gutted their credibility with unreliable ratings for mortgage-backed securities during the housing boom). This credit downgrade could require A.I.G. to post billions of dollars of additional collateral for its mortgage derivative contracts.

Fat chance. That’s collateral A.I.G. does not have. There is therefore a substantial possibility that A.I.G. will be unable to meet its obligations and be forced into liquidation. A side effect: Its collapse would be as close to an extinction-level event as the financial markets have seen since the Great Depression.

WHHHEEEEEEEEEE!!!