Wednesday, September 17, 2008

Fed to bailout AIG

After years of deregulation, the government will continue its policy of bailing out financial companies with an $85 billion Federal Reserve loan to American International Group, Inc. (AIG).

In return for the funds, the federal government will receive a 79.9% stake in the company.

The company with 1.1 trillion in assets and 74 million clients in 130 countries will still likely be liquidated eventually, but in gradual less chaotic fashion.

"[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 in a statement.

The move, however, did little to calm Wall Street with Dow down so far about 348 points.
Fed in AIG rescue - $85B loan - 56 minutes ago

Government response reaches dramatic new level: US will take 80% stake in nation's largest insurer to prevent global financial chaos.
Video: Government Bails Out AIG With $85 Billion Loan AssociatedPress
Treasury selling debt to help Fed Reuters

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