Stocks fell sharply Monday morning and the dollar rose against the higher-yielding currencies as it fell vs. the yen after AIG CEO Edward Liddy told CNBC that it's difficult to say if AIG will need even more government bailout money.

The government announced it would provide A.I.G. with up to $30 billion in additional funds from the $700 billion Troubled Asset Relief Program. Terms of Treasury's previous $40 billion preferred investment eased; the new deal increases equity content of the preferred stake and reduces the annual cost of servicing dividends by more than $4 billion.

The firm earlier today announced a $66.61 billion loss in the fourth quarter, the largest in U.S. history.

In recent trade, DOW was lower by 3.33%. The broader S&P 500 was lower by 3.73% and the NASDAQ by 2.90%.

The dollar was trading in pure risk-aversion mode with gains of 0.69% on the euro, 2.22% against the pound, 1.19% against Australia's dollar and by 1.64% against the Kiwi as it fell 0.39% to the yen.

Crude for March delivery was down a massive 9.45% on the day while April gold declined by 0.16%.