FEDERAL RESERVE EXTENDS $85B LOAN TO AIG by Ken Mahoney

FEDERAL RESERVE EXTENDS $85B LOAN TO AIG by Ken Mahoney

The Federal Reserve has extended an $85 billion dollar loan to the American International Group. Governor David Paterson yesterday called on the fed to do just that in order to give AIG the short-term liquidity it needs to stay alive. It was clear to most that the state’s offer to help AIG access $20 billion through its subsidiaries was simply not enough to keep the company from going under. The firm is a major player in the financial insurance industry and has been pummeled by its willingness to cover mortgage-backed securities and other risky debt. AIG will pay substantial interest on the two-year loan. As part of the deal, the U.S. government has the right to stop payments of dividends to AIG shareholders