"American International Group, the world's largest insurance company and one of the 30 stocks in the Dow Jones Industrial Average, is having a liquidity crisis. One thing the firm does is insure bonds tied to the mortgage market, which leaves them on the hook when mortgage defaults increase."

All the financial problems we are having now are interconnected. They all stem from the bursting of the real estate bubble, primarily in over-priced California. There are nearly 40 million people trying to live in that one state and, for many years, the housing demand was more than the supply, a major reason for the high house prices.

Also, California was considered the #1 place to move by people around the world. Many did just that: moved to California.

Most of the financial and insurance institutions were just doing "business as usual". There was no other choice. Everyone knew that an adjustment would come but "when" and "how big" was not known.

BTW, the $220 million, when spread around to 400 people is about $550 thousand each. That will not get you 3rd string outfielder in major league baseball.