It has yet to be determined whether the U.S. economy is in a recession, but the stock market has sure acted like it.

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It has yet to be determined whether the U.S. economy is in a recession, but the stock market has sure acted like it.

The average recession sees the Standard & Poor’s 500 index drop 25.6 percent from peak to trough, according to Citi Investment Research. So far this downturn, the index has fallen 26.5 percent from its Oct. 9 closing high through Wednesday. The biggest peak-to-trough decline over the past nine recessions was a 48.2 percent drop in the mid-1970s.

The National Bureau of Economic Research, a group of economists, declares the beginnings and ends of recessions, though it only does so months after the fact.

AIG’s swiftly vanishing cushion

How swift has the fall been for American International Group (AIG)?

Less than seven months ago, the insurer estimated it had between $14.5 billion and $19.5 billion in “excess capital” as of Dec. 31, 2007. That’s about the size of the economy of Bahrain in 2007, according to the World Bank. The excess-capital figure was AIG’s best guess at the time of how much it had on top of required capital to cover potential losses.

In May, AIG said unrealized depreciation of investments, impairments, dividends and stock buybacks knocked its excess capital down by about $12 billion. In August, it didn’t give an estimate.

Fisher falls in line

It had been as regular as the tide: The Federal Reserve’s policy-making committee would meet on interest rates, and Dallas Fed President Richard Fisher would vote against most of his colleagues.

After joining the Federal Open Market Committee in January, Fisher dissented in five straight votes.

That is, until Sept. 16, when the FOMC voted unanimously to hold the target for the federal funds rate steady.

This, along with the Fed’s news release, shows the body has shifted to a “dovish” posture from a “hawkish-neutral” position, says Merrill Lynch economist David Rosenberg.

The Associated Press