AIG Gets Up to $85 Billion Loan From Fed as U.S. Takes Control
Published September 17th, 2008 in Musings. 0 CommentsBy Craig Torres
Sept. 16 (Bloomberg) — The Federal Reserve Board, with support of the U.S. Treasury, invoked emergency powers to lend up to $85 billion to American International Group Inc. to save the firm from collapse.
“The Board determined that, in current circumstances, a disorderly failure of AIG could add to already significant levels of financial market fragility and lead to substantially higher borrowing costs, reduced household wealth and materially weaker economic performance,” the Fed said on a day when it left the benchmark lending rate unchanged at 2 percent.
The purpose of the “liquidity facility is to assist AIG in meeting its obligations as they come due,” the Fed said in its statement. The facility has a 24-month term. Interest will accrue on the outstanding balance at the three-month Libor rate plus 8.5 percentage points.
“The loan is expected to be repaid from the proceeds of the sale of the firm’s assets,” the Fed said. “The U.S. government will receive a 79.9 percent equity interest in AIG and has the right to veto the payment of dividends to common and preferred shareholders.”
To contact the reporters on this story: Craig Torres in Washington at ctorres3@bloomberg.net.
Last Updated: September 16, 2008 21:04 EDT
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Well done! AIG is now a public insurer!
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