Fed rescues AIG for USD 85 billion

Good Afternoon friends,
From last many days everyone was talking about AIG is going to be bankruptcy. India’s Tuesday night and america’s Tuesday morning , United States Government has agreed to a US$ 85 billion bailout for AIG.

We all are aware with the fact that AIG is Insurance company and is also working in india. In india AIG tied up with TATA and with TATA AIG Life and TATA AIG Insurance. TATA AIG is having all type of insurance in india including Life, Motor, Travel, Accident & Health, Business Property. They also have Mutual Funda and Retirement Services with their name in india. I read following news at PTI.

Fearing worldwide impact of collapse of American Insurance Group (AIG), the United States government has agreed to a USD 85 billion bailout that gives it control of the troubled insurance giant operating in 130 countries. The US Federal Reserve decided to bail out AIG hours after it decided to keep the benchmark bank rate unchanged at two per cent, despite hopes expressed by many financial experts that it would be slashed.

The federal government reversed its decision against intervention late Tuesday after it became clear that AIG was unable to get bank loan and would have to file for bankruptcy protection within hours, leading to major consequences and danger to the financial system. Only last week, the government had declined to support investment banker Lehman Brothers Holdings leading to it filing bankruptcy protection, but analysts say AIG was too big to be allowed to fail.

What frightened Fed and Treasury officials, the New York Times said, was not simply the prospect of another giant corporate bankruptcy, but AIG's role as an enormous provider of financial insurance to investors who bought complex debt securities. That effectively required AIG to cover losses suffered by buyers in the event of securities defaulted.

It meant AIG was potentially on the hook for billions of dollars worth of risky securities that were once considered safe. PTI.