Wall Street Meltdown: Global Fallout

The fund may have been conservative in terms of the stocks it holds (China Telecom and Bank of China, among others), but it hasn't been safe. China's stock markets have fallen by 63% this year. Alerted to the severity of the slide by one of her investment-club friends, Zhu checked on the mutual fund earlier this week as Shanghai's stock index plunged below the 2,000-point level for the first time in nearly two years. Zhu was stunned to see that her investment had lost nearly 70%.

The money represented almost all of her and her husband's life savings, she says. It had been intended to help her navigate the Chinese medical system on her daughter's behalf, and was going to be used to settle what Zhu calls "the fees and occasional small payments" (bribes) that are critical to making sure she gets the best care. "We own our apartment, so that's OK," she says quietly. "But now I don't know whether I'll have enough. I should have been paying more attention." Putting the money under the mattress might have been a better idea. — by Bill Powell

Singapore -5.9%
(Straits Times Index, 9/15-9/17)

Philip Aee is a patient man. Patient — and very, very concerned. The 60-year-old retiree was among some 150 other Singaporeans waiting in a long line outside the offices of U.S. insurance giant AIG's Singapore subsidiary, AIA, during the afternoon of Sept. 17. Aee had been standing in the searing sunshine for three hours, but he wasn't giving up. He and his fellow petitioners were desperate to cancel their insurance policies and withdraw investments, just in case AIG went belly up, leaving assets held by AIA in limbo. Aee was well aware that the U.S. Federal Reserve had extended an $85 billion lifeline to AIG several hours before. But the news did little to calm his nerves. "I never thought this would happen to AIG," said Aee, shaking his head in amazement.

With over 4,000 agents and 2 million policies in force in Singapore (population 4.6 million), AIG is one of the city's largest insurance operators. Its pervasive presence underscores the global reach of the U.S. financial companies that have been torpedoed by the subprime crisis — and the worldwide consequences of an unfolding crisis of confidence among their customers and business partners. The Monetary Authority of Singapore, the city's financial regulator, stated that the financial resources of AIA currently met its requirements — an attempt to assure the public that there was no reason for panic. But after the failure of investment bank Lehman Brothers, the sale of Merrill Lynch, and the bailout of home-mortage giants Fannie Mae and Freddie Mac, hundreds of Singaporeans were taking no chances. Standing in the crowd outside AIA's offices, Karen Foo, 29, said she was only dimly aware of the underlying assets in the investment trust her insurance policy is linked to, but she was determined to sell the financial instrument at the earliest opportunity. "I'm a little worried," Foo said with a tight smile.

Aee, who holds an AIG-linked trust worth roughly $7,000, said if he managed to get inside the insurer's besieged offices — which could take him many more hours — he planned to close out his investment. "There's nothing like cash in your hands," he said. It seems the expression "like money in the bank" has fallen out of favor with a public that is weighing what they stand to lose as the shakeout of financial-industry titans continues. — by Neel Chowdhury