AIG gets another Fed lifeline The Federal Reserve on Wednesday threw another financial lifeline to AIG, agreeing to provide up to $37.8bn in additional liquidity to the stricken insurer. The move, which comes on top of the $85bn rescue loan that gave the government control of the company last month, is designed to help AIG fund its troubled securities lending operations. Before its collapse, AIG had used the programme - which lent securities to fund managers and other financial institutions for a few days in exchange for a fee and cash collateral - as a source of liquidity. AIG reinvested the collateral in longer-dated instruments, including troubled mortgage assets. The plunge in the value of those assets made it impossible for AIG to repay its counterparties once they returned the securities and demanded the collateral back.
The Federal Reserve on Wednesday threw another financial lifeline to AIG, agreeing to provide up to $37.8bn in additional liquidity to the stricken insurer.
The move, which comes on top of the $85bn rescue loan that gave the government control of the company last month, is designed to help AIG fund its troubled securities lending operations.
Before its collapse, AIG had used the programme - which lent securities to fund managers and other financial institutions for a few days in exchange for a fee and cash collateral - as a source of liquidity.
AIG reinvested the collateral in longer-dated instruments, including troubled mortgage assets. The plunge in the value of those assets made it impossible for AIG to repay its counterparties once they returned the securities and demanded the collateral back.
Is that what one calls "throwing good money after bad"? Sure looks like it... In the long run, we're all dead. John Maynard Keynes
