U.S. government near deal on another AIG bailout

| 28 February 2009 21:00

This is in via Reuters:

American International Group Inc is close to a deal with the U.S. government that would ease the terms of its bailout, provide a further equity commitment and help it pay down debt, a person familiar with the matter said on Saturday.

The revision would be the latest sign of how federal regulators are having to tweak bailout packages for financial institutions deemed too big to fail as the economy and markets worsen.

The board of the troubled insurer is due to meet on Sunday to vote on the deal, which could be announced when AIG reports its quarterly results on Monday, the source said.

That would be just days after the government agreed to boost its equity stake in Citigroup Inc to as much as 36 percent in a bid to bolster another financial giant that taxpayers had already poured billions of dollars into.

The revised AIG agreement is expected to include an additional equity commitment of about $30 billion, more lenient terms on an existing preferred investment, and a lower interest rate on a $60 billion government credit line, the source said.

The new equity commitment would give AIG the ability to issue preferred stock to the government at a later date, the source said.

In my view, AIG is a nationalized organization being treated at arms length as if it were a private company. Is this the template for creeping nationalization as Marshall Auerback suggested to me? If it is, god help us.

avatar About Edward Harrison

Edward Harrison is the founder of Credit Writedowns and a former career diplomat, investment banker and technology executive with over twenty years of business experience. He is also a regular economic and financial commentator on BBC World News, CNBC Television, Business News Network, CBC, Fox Television and RT Television. He speaks six languages, a skill he uses to provide a more global perspective. Edward holds an MBA in Finance from Columbia University and a BA in Economics from Dartmouth College.

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2 Comments

  1. avatar Glen says:
    1 March 2009 at 05:06

    ..and yet the same incompetent navigators remain at the helm of a ship sailing to oblivion. Will there be a mutiny at hand? Probably not. The USS Obama is so stranded at the dock by incompetence, it will never set sail.

  2. avatar robbwindow says:
    2 March 2009 at 12:50

    It’s Great what Britain is doing is really trying to help everybody sort things. Should be fun to see the end result, great post.