INSTANT VIEW: AIG plummets on report of U.S. conservatorship

NEW YORK (Reuters) - Shares of American International Group (AIG.N) fell 48 percent in trading after the bell on Tuesday after Bloomberg reported that the U.S. government is considering conservatorship as an option for the insurer.

Bloomberg cited two people briefed on AIG talks.

The New York Insurance Department has no comment on the report.

S&P 500 futures fell 17.7 points and were below fair value, a formula that evaluates pricing by taking into account interest rates, dividends and time to expiration on the contract. Dow Jones industrial average futures DJc2 dropped 135 points.

ANTON SCHUTZ, PRESIDENT OF MENDON CAPITAL IN ROCHESTER, NEW

YORK:

"They're too big to fail. AIG touches too many people and too many companies globally, and it would be much more of a disorderly event if it went bankrupt than it was with Lehman."

DAVID ADER, HEAD OF GOVERNMENT BOND STRATEGY WITH RBS GREENWICH

CAPITAL IN GREENWICH, CONNECTICUT:

"This would mean another shareholder wipeout, and government support for the (what?) underlying assets, the underwritten CDS? Presumably just that."

DAVE ROVELLI, MANAGING DIRECTOR, US EQUITY TRADING CANACCORD

ADAMS

"This is probably going to wipe out the shareholders again. It's not good, but this company is too big to fail and the government knows that. They're going to keep saying they're not going to rescue, but they have to do something.

"Thing is, they can't rescue the shareholders. The market is getting killed right now, futures are down sharply.

"This is not good. It puts more strain on our taxpayers, more strain on our government, puts us more in debt... and what's next?

"But they can't let it fail, there's no way, it would be mayhem."