A bridge loan is not a bail out. On Sep 16, 11:25 pm, Frank <[EMAIL PROTECTED]> wrote: > $107b rescue for AIG > > * September 17, 2008 - 1:01PM > > In a bid to save financial markets and the economy from further > turmoil, the US government agreed today to provide a $US85 billion > ($107 billion) emergency loan to rescue the giant insurer AIG. > > The Federal Reserve said in a statement it determined that a > disorderly failure of AIG could hurt the already delicate financial > markets and the economy. > > It also could ''lead to substantially higher borrowing costs, reduced > household wealth and materially weaker economic performance'', the Fed > said. > > ''The president (George W Bush) supports the agreement announced this > evening by the Federal Reserve,'' said White House spokesman Tony > Fratto. > > ''These steps are taken in the interest of promoting stability in > financial markets and limiting damage to the broader economy.'' > > Treasury Secretary Henry Paulson said the administration was working > closely with the Fed, the Securities and Exchange Commission and other > government regulators to ''enhance the stability and orderliness of > our financial markets and minimise the disruption to our economy.'' > > ''I support the steps taken by the Federal Reserve tonight to assist > AIG in continuing to meet its obligations, mitigate broader > disruptions and at the same time protect taxpayers,'' Paulson said in > a statement. > > The Fed said in return for the loan, the government will receive a > 79.9% equity stake in AIG. > > Earlier, Fed chairman Bernanke and Paulson met with Senate Banking > Committee Chairman Senator Christopher Dodd, Senate Majority Leader > Harry Reid and House Republican leader John Boehner to brief them on > the government's options. > > ''At the administration's request, I met this evening with Treasury > Secretary Henry Paulson and Federal Reserve Chairman Ben Bernanke. > They expressed the administration's views on the deepening economic > turmoil and shared with us their latest proposals regarding AIG,'' > Reid told reporters. > > ''The Treasury and the Fed have promised to provide more details in > the near future, which I believe must address the broader, underlying > structural issues in the financial markets.'' > > Shares of the insurance company swung violently yesterday as rumours > of potential deals involving the government or private parties emerged > and were dashed. Its shares closed down 20% at the end of the day - > and another 45% after hours. Still, no deal emerged. > > The problems at AIG stemmed from its insurance of mortgage-backed > securities and other risky debt against default. If AIG could not make > good on its promise to pay back soured debt, investors feared the > consequences would pose a greater threat to the US financial system > than this week's collapse of the investment bank Lehman Brothers. > > The worries were triggered after Moody's Investor Service and Standard > and Poor's lowered AIG's credit ratings, forcing AIG to seek more > money for collateral against its insurance contracts. Without that > money, AIG would have defaulted on its obligations and the buyers of > its insurance - such as banks and other financial companies - would > have found themselves without protection against losses on the debt > they hold. > > ''It might not just bring down other financial institutions in the US. > It could bring down overseas financial institutions,'' said Timothy > Canova, a professor of international economic law at Chapman > University School of Law. ''If Lehman Brother's failure could help > trigger AIG's going down, who knows who AIG's failure could trigger > next.'' > > New York-based AIG operates insurance and financial services > businesses ranging from property, casualty, auto and life insurance to > annuity and investment services. Those traditional insurance > operations are considered healthy and the National Association of > Insurance Commissioners said ''they are solvent and have the > capability to pay claims''. --~--~---------~--~----~------------~-------~--~----~ Thanks for being part of "PoliticalForum" at Google Groups. For options & help see http://groups.google.com/group/PoliticalForum
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