US shares plunged by over 200 points as Wall Street opened on fears a $3 billion rescue of Ambac, America's second largest bond insurer, had hit a brick wall while investors took fright at the sudden departure of AIG's head of financial products.

The Dow Jones Industrial Average lost 201.60 points to 12,381.60 on the final day of February, taking the index of America's leading shares to its fourth straight monthly loss for the first time since September 2002. In London, the FTSE 100 index lost 103.1 points to 5,862.6.

AIG, the world's largest insurer, announced that Joe Cassano, head of its financial products division, will retire at the end of March but stay on as a consultant until a permanent replacement is found.

The insurer was forced to write-off $11.1 billion worth of credit swaps in its financial products unit, leading to the worst quarterly loss in its 89-year history of $5.29 billion.

Wall Street took a downward turn as reports began to emerge that a plan to bail out Ambac, led by a number of financial institutions including Royal Bank of Scotland and Barclays, had hit problems.

If the banks fail to rescue Ambac they will potentially be left making even more writedowns on sub-prime backed assets because the bond insurer may not have enough funds to satisfy large claims on toxic securities.

UBS said in a note today that losses from the current global credit crisis could reach as much as $600 billion, with banks and brokers responsible for $350 billion of the total figure.

So far, according to UBS, around $160 billion has already been written off by both banks and brokers.

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