Financing Deals Make AIG a Drag on Transit Agencies

With AIG sinking, banks are calling loans to transit agencies
By Clay Dillow,  Newser Staff
Posted Oct 24, 2008 2:55 PM CDT
A Chicago Transit Authority bus passes a CTA garage on Chicago's West Side in this Oct. 12, 2007 file photo.    (AP Photo/M. Spencer Green, File)
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(Newser) – Transit agencies nationwide are facing the prospect of unexpectedly having to repay billions in loans to large banks under financing deals made years ago, the Washington Post reports. Because AIG guaranteed many of the agreements, the insurance behemoth's woes could potentially affect millions of public transit riders as banks worldwide demand full payment for multimillion-dollar loans in coming weeks.

Besides the Washington-area Metro system, Chicago's El and the transit systems in Atlanta and San Francisco are tangled up in the deals, which offered banks tax shelters; they're no longer legit under IRS rules. Metro's CFO is calling for the federal government to get involved, saying, "We would be able to satisfy the technicality so the banks would not be looking to take their greed out unnecessarily on public transit."