Accessibility links

US Government Increases Aid to AIG

Washington has boosted its support for insurance giant American International Group, or AIG, to about $150 billion after an initial rescue package failed to stop major losses.

The new plan announced Monday, is nearly double AIG's initial rescue package and strengthens the government's grip on the company.

Under the new deal, the U.S. government is reducing the $85 billion loan it offered AIG in September to $60 billion. It also is giving AIG a cheaper interest rate to make it easier to pay back the loan.

The government will buy $40 billion worth of preferred stock for partial ownership of the private company. It also will buy about $52 billion worth of AIG's troubled assets.

Analysts say the measures should take the stress off the company and help it prevent future losses.

The restructured package was unveiled after AIG announced nearly $25 billion in losses in the third quarter of this year. That compares with three billion dollars in profits in the same period last year.

When AIG was on the verge of collapse in September, analysts warned its demise would undermine the entire financial system. The government intervention is one of the biggest in U.S. history.

The government also rescued the home mortgage institution Fannie Mae. That company reported a third-quarter loss of nearly $29 billion Monday, due to a slowdown in the real estate sector.

Some information for this report was provided by AFP, AP, Bloomberg and Reuters.