New Plan: Government Throws AIG Another $40 Billion


Back in October, when the government gave ailing insurer AIG a $38 billion credit line — on top of the $85 billion they gave it in September — the company's new CEO compared the cash infusion to "water pouring into a bathtub — a lot might be needed at first, but eventually the tub would be filled and the faucet could be turned off." But today the company is looking more like a toilet: This morning, after AIG reported a $24.47 billion loss, the government announced it would be injecting $40 billion more into the insurer, through the purchase of preferred shares under the Trouble Asset Relief Program. Apparently, this was recently discovered:

The government’s original emergency line of credit, while saving A.I.G. from seeking bankruptcy protection for a time, now appears to have accelerated the company’s problems. The government’s original short-term loan came with a high interest rate — about 14 percent — which forced the company into a fire sale of its assets and reduced its ability to pay back the loan, putting its future in jeopardy.

Emphasis ours because ugh. This brings the total amount of taxpayer money invested in AIG to $150 billion, the most, according to the Times, the government has ever directed to a single private enterprise. We sure hope they're enjoying those pedicures.

U.S. Provides More Aid to Big Insurer [NYT]