Mammoth Writedowns Hammer AIG

American International Group posted a record-breaking $7.8 billion first-quarter loss yesterday, reports the Wall Street Journal. The insurance giant blamed the poor results on the sagging housing market, the credit crunch and the see-sawing stock market. It announced plans to raise $12.5 billion to patch up the damage to its balance sheet from heavy writedowns.

AIG's shares dove to a near 10-year low following release of the figures. The AIG losses—which follow a $5.3 billion loss last quarter—dealt a blow to optimists who had thought the worst of the credit crisis had passed. Regional banks have announced massive losses in the last week, but some analysts believe the crunch appears to be easing on Wall Street. (More AIG stories.)