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U.S. Bails Out AIG with $85 Billion

  • VOA News

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.

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