The global financial downturn deepened yesterday, as insurance giant American International Group was bailed out for the third time in five months by the US Government after announcing the biggest loss in corporate history.

Stock markets plunged around the world and in New York the Dow Jones industrial average fell 4.2 percent, closing below 7,000 points for the first time in nearly 12 years.

The markets slumped after AIG, which employs around 200 people in Bermuda, reported a fourth-quarter loss of $61.7 billion.

HSBC, owner of the Bank of Bermuda, said it would close down most of its US-based consumer lending business, axe more than 6,000 US jobs and would seek to raise almost $18 billion through the biggest rights issue in British history.

The already battered shares of Bermuda-based international companies plunged with the rest on the stock markets.

Adding to the Island's economic concerns, a bill was set to be offered in the US Senate last night that targets Bermuda, among other countries on a list of "tax havens".

The bill, sponsored by Senator Carl Levin, contains additional provisions to the Stop Tax Haven Abuse Act co-sponsored last year by Barack Obama before he became President.

One proposal is that "US-controlled foreign corporations" should be treated as domestic for income tax purposes.

Amid the gloom, there was better news on the business front, as Bermuda insurance companies IPC Holdings Ltd. and Max Capital Group Ltd. announced plans to merge.

Read the full stories in Business.