New York – Fed to Give A.I.G. $85 Billion Loan and Take 80% Stake

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    New York – In an extraordinary turn, the Federal Reserve agreed Tuesday night to take a nearly 80 percent stake in the troubled giant insurance company, the American International Group, in exchange for an $85 billion loan, according to people with knowledge of the negotiations.

    The Federal Reserve and Goldman Sachs and JPMorgan Chase had been trying to arrange a $75 billion loan for the company to stave off the financial crisis caused by complex debt securities and credit default swaps. The Federal Reserve stepped in after it became clear Tuesday afternoon that the banking consortium would not be able to complete the deal.

    Without the help, A.I.G. was expected to be forced to file for bankruptcy protection.

    The need for the loans became necessary after the major credit ratings agencies downgraded A.I.G. late Monday, a move that likely to have forced the company to turn over billions of dollars in collateral to its derivatives trading partners worsening its financial health.

    Until this week, it would have been unthinkable for the Federal Reserve to bail out an insurance company, and A.I.G.’s request for help from the Fed of just a few days ago was rebuffed.

    But with the prospect of a giant bankruptcy looming — one with unpredictable consequences for the world financial system — the Fed abandoned precedent and agreed to let the money flow.

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    14 COMMENTS

    1. OMG, who knows where this is heading; Major catastrophe with unstoppable leaks. THE TITANIC HIT AN ICEBERGS and it’s sinking!

      What Swindlers!

      What Swindlers!

      What Swindlers!

      Those sub-prime mortgages all brokers, appraisers, lawyers, bankers, etc. KNEW PERFECTLY WELL that it’s an ivitation for this.

      Well, they asked for it and WE ALL GOT IT!

      Leider Acheini bnei yisroel hansinim batzuru vchili, who knows how many thousands of yidishe yingeleit lost already and will still lose their farmegen and PARNUSE all at once, RACHMUNE LITZLON!

    2. AIG cannot fail. It employs 4 times more people then LEH and the exposure to AIG is all the way to little guy versus LEH was mostly wealthy clients.

      Although AIG’s main bombshell victims would of being in europa and not the US, still we would have a repeat of Monday and PLUS.next on the hitlist is WM. The american express (credit card default) then C (citygrp)

    3. to the previous commenter:

      we used to say-

      “too big to fail”

      that no longer applies-

      bear stearns, fannie mae, freddie mac, & lehman bros was alos “too big to fail”

      but they did- simple lesson for the future- keep leveraging in check & keep overhead low- these businesses had they been smaller would have been attractive (at least portions of it) to many other players. there aren’t that many players that can afford takeovers & buyouts of these porportions. the playing field just got a lot smaller. america’s financial system’s glory days are HISTORY.

    4. 1 more point-

      I suspect the Fed is racing in to rescue all these companies for one simple reason- if they didn’t it would be china or the arabs- the thought of it makes me shudder

    5. For all of you who think “the Fed” aka Federal Reserve is part of the federal government, I have news; It’s not. The Federal Reserve is a private bank it is as much part of the government as Federal Express.

    6. The Federal Reserve System (also the Federal Reserve; informally The Fed) is the central banking system of the United States. Created in 1913 by the enactment of the Federal Reserve Act, it is a quasi-public (government entity with private components) banking system[1] composed of (1) the presidentially appointed Board of Governors of the Federal Reserve System in Washington, D.C.; (2) the Federal Open Market Committee; (3) 12 regional Federal Reserve Banks located in major cities throughout the nation acting as fiscal agents for the U.S. Treasury, each with its own nine-member board of directors; (4) numerous private U.S. member banks, which subscribe to required amounts of non-transferable stock in their regional Federal Reserve Banks; and (5) various advisory councils. As of February 1, 2006, Ben Bernanke serves as the Chairman of the Board of Governors of the Federal Reserve System.

    7. Tina, the preparations for the ELUL SHAKE UP, as you call it, started you know when? when the first SHNORER got his SUB prime mortgage 100% on the contract AND THAT CONTRACT WAS ALREADY THE 5th one churned from 100G to 1 million on that samee property with anyone taking title yet!

      KAPICH?

      They all closed their eyes and said SHMA YISROEL HASHEM ELOKEINI HASHEM EEEEEEEEEEEECCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCCHHHHHHHHHHHHHHHHHHHHHHHHHOOOOOOOOOOOOOOOOOOOOOOOODDDDDDDDDDDDDDDDDDDDDDDDD and then signed off on all the paperwork.

      Nebech, some joke.

    8. I see a MAJOR DEPRESSION AHEAD, and the arrival of MOSHIACH following. I have never seen such financial turmoil, where banks fail one after another. This is no joke brothers and sisters, let’s start to pray now!

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