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December 2, 2008 8:59:11 PM CST

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Fed to Bail Out AIG With $85B Loan

Posted Sep 16, 08 7:39 PM CDT in Business 

(Newser) – The Federal Reserve is poised to rescue insurance giant AIG with an $85 billion loan, MSNBC reports. In return, the Fed will take an 80% stake in the company, which is one of the world's biggest insurers. The move is a reversal for the US government, but federal officials determined that AIG's failure would be "catastrophic" in the current financial climate, the Wall Street Journal notes. AIG's board approved the deal late today.

If AIG went bust, it could affect small investors who have money-market funds that invest in the company, the Journal notes. Fed chief Ben Bernanke and Treasury chief Henry Paulson decided to act after trying unsuccessfully to drum up help from the private sector. AIG shares closed at $3.75 today, down from $70.13 in the past year.

Sources MSNBC, Wall Street Journal

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A man leaves an American International Group office building Tuesday, Sept. 16, 2008, in New York.   (AP Photo/Mark Lennihan)
A woman walks past the office of U.S. insurance giant AIG in South London, Tuesday, Sept. 16, 2008.   (AP Photo/Sang Tan)
A man enters the office of U.S. insurance giant AIG, American International Group, in Croydon, South London, Tuesday, Sept. 16, 2008.   (AP Photo/Sang Tan)
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