Moody's Investors Service cut AIG's rating to A2 from Aa3, a two-notch downgrade. S&P lowered the rating to A-minus from AA-minus, a three-peg reduction, and Fitch Ratings reduced its standing to A from AA-minus, a two-notch cut.
AIG's ratings are still investment grade, although all three agencies said more downgrades could follow.
"AIG seems to be the next guy on the chopping block," said Tom Sowanick, chief investment officer at Clearbrook Financial LLC in Princeton, New Jersey.
Again seeking a private solution to Wall Street's woes, the Fed had asked JPMorgan Chase & Co and Goldman Sachs Group Inc to explore arranging $70-$75 billion in loans to support AIG, among other financing options, another person familiar with the situation said.
AIG turned to the Fed late on Sunday after failed talks with several buyout firms and Warren Buffett's Berkshire Hathaway. The company has also said it was exploring asset sales.
MARKETS TUMBLE
Asian stocks tumbled across the board, with Tokyo down more than 5 percent at a three-year low. Japanese government bond futures jumped by their daily limit of three full points as investors fled to safe havens, while Japan's central bank said it would strive to maintain stability in financial markets.
Hong Kong's Hang Seng Index was off nearly 7 percent, while Seoul's main index dropped more than 6 percent.
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