View Full Version : US throws AIG new $US150bn lifeline

mick silver
10th November 2008, 13:15
THE US government has reached a deal night to scrap its original $US123 billion ($179 billion) bailout of American International Group and replace it with a new $US150 billion package, according to people familiar with the matter.

While the arrangement stands to considerably ease terms on the faltering insurer, it gives the government an unprecedented role as an actor in financial markets. It could also spark a political backlash, especially from congressional Democrats, because the Treasury, while adding to its AIG obligations, has thus far refused to extend a hand to the struggling Big Three auto makers.

Details of the revised deal could be announced as soon as today (late tonight or early tomorrow AEDT) -- when the company is expected to report third-quarter earnings. Under the terms ironed out, the government would give AIG more money, including $US40 billion from the US Treasury's $US700 billion Troubled Asset Relief Program. It would also receive less interest than on the bulk of the original loan, while freeing AIG from exposure to some of the risky financial instruments that nearly caused it to file for bankruptcy protection.

The $US150 billion in government aid consists of a $US60 billion loan, a $US40 billion preferred-stock investment and $US50 billion in capital largely to purchase distressed assets which are to be placed into two separate financing entities.