American International Group (AIG) Rescued by Federal Reserve

American International Group (AIG), the biggest insurer of the world was rescued by Federal Reserve. AIG was struggling to continue as the company’s Credit Default Swap wing earned billions of dollars loss. Federal Reserve agreed to give a loan of $85 billion to stop the collapse of the Wall Street. With this loan the US government will have 79.9% share in the company. AIG will have to return the money within 2 years at a higher interest rate. Markets didn’t calm down even with the move by Fed; they tumbled by more than 4.5 % on Wednesday.

The move came as a surprise as the Fed declared, few days back that it would not rescue any more financial institutions. Mean while, TATA declared that AIG’s Indian joint venture TATA AIG Life is safe as the venture is well capitalized and is subject to stringent local regulatory and capital requirements. Tata holds the major share of 74% in the TATA AIG Life.

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September 18, 2008 | Filed Under Market Analysis 

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