AIG gets $85 billion bailout

AIG gets $85 billion bailout

POSTED 09/17/08 - The U.S. government stepped up to rescue private insurer American International Group Inc. Tuesday saying their failure would further disrupt markets and threaten the already fragile economy. AIG does business with almost every financial institution in the world and insures $88 billion worth of assets including mortgages and corporate loans.

The Federal Reserve will provide up to $85 billion in an emergency, two-year loan to rescue AIG. In return, the government will get a 79.9 percent stake in AIG and the right to remove senior management. This move is similar to the government’s bailout of Fannie Mae and Freddie Mac to keep them from going broke.

Also on Tuesday, the Fed surprised analysts when it decided to keep its key interest rate steady at 2 percent.

The stock market, which Monday had its worst session since the September 11 attacks, recovered somewhat after the decision on interest rates was known. The Dow Jones industrials rose 141 points after losing 500 points on Monday.