The U.S. government has agreed to provide an 85 billion dollar
emergency loan to rescue the world's biggest insurance firm, American
International Group (AIG).
The Federal Reserve Board authorized the loan late Tuesday, with the
support of the Treasury Department. The Fed said it determined a
"disorderly failure" of AIG could add to what it called "already
significant" levels of fragility in financial markets.
It said the U.S. government will receive a 79-point-nine percent equity stake in the insurance giant.
AIG was on the verge of collapse due to major losses in the housing
crisis. Earlier this week, the mortgage and credit crisis led a major
U.S. investment bank, Lehman Brothers, to file for bankruptcy. If the
government had not stepped in, AIG may have been forced to do the same.
Central banks in Europe, Asia and the United States put billions of
dollars into financial markets Tuesday in an attempt to keep the global
economic crisis from worsening.
U.S. stock markets moved up strongly at the close, recovering some of the ground lost in Monday's steep declines.
Most Asian markets are little changed in early Wednesday trading.
On Tuesday, market indexes around the world were down sharply for a
second day. Many markets plunged Monday following the collapse of
Lehman Brothers. Late Tuesday, British bank Barclays agreed to buy
parts of Lehman Brothers for one-point-seven-five billion dollars.
Key stock markets in Japan and Hong Kong Tuesday lost around five
percent of their value. Russian officials suspended trading on their
main (RTS) stock
exchange after prices plunged more than 10 percent. And major European
stock indexes were sharply lower at the close of trading.