Article published November 10, 2008
Government provides new aid to AIG
New York State Attorney General Andrew Cuomo speaks to the press on Wall Street on Oct. 15, in New York. Cuomo is telling American International Group Inc. to do away with golden parachutes for executives, golf outings, overseas hunting trips and parties while taking government money to stay afloat. At left is Benjamin Lawsky, special assistant, Attorney General's office, and at right is Eric Cornwald, executive deputy with the Attorney General's office for economic justice.
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ASSOCIATED PRESS
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ASSOCIATED PRESS
WASHINGTON - The government on Monday provided new financial assistance to troubled insurance giant American International Group, including pouring $40 billion into the company in return for partial ownership.
The action was announced jointly by the Federal Reserve and the Treasury Department. All told, the moves boost aid to the company to around $150 billion.
The $40 billion infusion comes from the recently enacted $700 billion financial bailout package. The government is buying preferred shares of AIG stock, giving it an ownership stake in the company.
As part of the new arrangement, the Federal Reserve is reducing a $85 billion loan it is had made available to AIG to $60 billion. The Fed also is replacing a separate $37.8 billion loan to the insurance company with a $52 billion aid package.
The government said the actions were needed to "keep the company strong and facilitate its ability to complete its restructuring process successfully."
It marked the first time money from the $700 billion bailout package Congress enacted last month has gone to any company other than a bank.
The Treasury Department, which is overseeing the program, has promised to inject $250 billion into banks in return for partial ownership. The original notion behind the bailout package was to help financial institutions lend money more freely again, one of the main reasons the economy is in danger of getting stuck in a long and painful recession.
Until Monday, all of AIG's bailout relief was coming from the Fed.
The Fed, earlier this year, said it would loan a total of $123 billion to AIG. The insurance company was later allowed to access another $20.9 billion through the Fed's "commercial paper" program. That's where the Fed is buying mounds of companies' short-term debt often used for crucial day-to-day expenses, such as payrolls and supplies.
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