US to hand insurer AIG extra $30bn
Firm registers largest-ever loss for a US company in a single quarter.
“AIG’s results in the fourth quarter were negatively affected by continued severe credit market deterioration,” the company said in a statement.
Taxpayer aid
AIG received $150bn in aid from the US taxpayer last year, but the US Treasury Department and Federal Reserve said that the ongoing financial crisis meant more assistance was likely to be needed.
“The Treasury Department will create a new equity capital facility, which allows AIG to draw down up to $30bn as needed over time,” they said in a joint statement.
“Given the systemic risk AIG continues to pose and the fragility of markets today, the potential cost to the economy and the taxpayer of government inaction would be extremely high.”
AIG has been unable to find buyers for parts of the company that it had hoped to sell off in order to make repayments on its existing loan.
The new aid package calls for the Federal Reserve to take stakes in two of AIG’s international units.
Instead of paying back $38bn in cash with interest that it has used from a Federal Reserve credit line, AIG will repay it with equity stakes in Asia-based American International Assurance Co. and American Life Insurance Co., which operates in 50 countries.
The Federal Reserve will also ease the interest rate it charges AIG for drawing on the credit line.