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AIG rescued by the Fed
American International Group staved off collapse yesterday after the U.S. Federal Reserve Bank of New York agreed to lend up to $85 billion to the cash-strapped insurer over two years at stiff rates ( thought to be more than 11.4% interest ) on the loan, in exchange for a 79.9% equity stake. A change at the helm has also been forced as former Allstate Corp CEO Edward Liddy becomes CEO.
The crisis can be traced back to November 2007 when AIG posted Q3 earnings down 27%. In June 2008 the SEC began probing how the firm valued its credit default swaps, which have emerged as a key weakness in it's balance sheet. Total losses from the subprime crisis reach $18 billion, and total write-downs $25 billion.
Investors and credit rating agencies grew more doubtful that AIG could offset its losses with enough capital, which became prohibitively costly to raise as its share price plunged.
AIG's life insurance, property and casualty insurance and aircraft leasing operations are considered healthy. The insurer, founded in Shanghai 89 years ago, now employs about 116,000 people and operates in more than 100 countries.
The crisis can be traced back to November 2007 when AIG posted Q3 earnings down 27%. In June 2008 the SEC began probing how the firm valued its credit default swaps, which have emerged as a key weakness in it's balance sheet. Total losses from the subprime crisis reach $18 billion, and total write-downs $25 billion.
Investors and credit rating agencies grew more doubtful that AIG could offset its losses with enough capital, which became prohibitively costly to raise as its share price plunged.
AIG's life insurance, property and casualty insurance and aircraft leasing operations are considered healthy. The insurer, founded in Shanghai 89 years ago, now employs about 116,000 people and operates in more than 100 countries.
Wed, 17th Sep 2008