The AIG story is big, yes, but after the federales dove in to save Fannie and Freddie, you knew more of the same was going to occur. It is what it is. The potential exposure to U.S. taxpayers is huge, but everyone is betting that things will turn around.
All this "sideline money" that is supposed to eventually save the market is now even more nervous. When one of the bedrock financial products starts to fall apart, it is another sign that this is not just some ordinary bear market.