The Fed saves AIG
September 16, 2008 by Tisa Silver
Filed under Finance
The Federal Reserve will provide AIG will receive an $85 billion loan in exchange for an 80 percent stake in the company.
Financing options from the private sector were ruled out earlier today (reportedly due to time constraints more so than lack of available cash from banks) and the government (and the world) could not afford to have AIG fail.
This is good and bad. Good in that it kept the world’s markets from suffering a catastrophic shock. Bad in a lot of ways…Should the Fed have intervened sooner since the number AIG supposedly needed went from $20 billion to $85 billion between Friday and today? Should the Fed have intervened at all since AIG is an insurer not a bank?
The Fed has entered creative but dangerous territory.
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