New AIG Bailout

November 10, 2008
By Kevin Cafferty

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The big financial news today is that the Fed is restructuring its bailout of AIG (NYSE:AIG), the Treasury plans to use $40 billion to buy new preferred shares in AIG. The money will come from the $700 billion in funds the government has authorized to bail out struggling banking and insurance firms.

From Forbes:

But markets are still in a tailspin, and AIG--which has been deemed too big to fail--is still on the ropes. The equity stake announced by the Treasury Monday allows the Fed more wiggle room in extending funds to AIG, as it cuts the original amount of funds loaned to the company from $85 billion to $60 billion.

Bloomberg goes into greater detail on the specifics of what the Fed plans to do:

To make the bailout affordable, the U.S. will reduce the $85 billion loan that saved AIG in September to $60 billion, buy $40 billion of preferred shares, and purchase $52.5 billion of mortgage securities owned or backed by the company, the Federal Reserve said today in a separate statement.

And, if you've want to go really deep, Reuters has a good 7-page article:

The company's net loss for the third quarter was $24.47 billion, or $9.05 per share, compared to net income of $3.09 billion, or $1.19 per share, in the same period last year. The loss was the company's fourth straight quarterly loss.

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