WASHINGTON — Fearing the shutdown of the nation's largest insurer, the Federal Reserve lent AIG $85 billion and gave the government a substantial stake in the company.
The loan is secured by AIG's assets and if the company recovers taxpayers could make a great deal of money. The government now has a $79.9% equity stake in the firm.
"This loan will facilitate a process under which AIG will sell certain of its businesses in an orderly manner, with the least possible disruption to the overall economy," the Fed said in a statement.
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The deal includes a provision that AIG Chairman/CEO Robert Willumstad leave the firm.
This is the latest movement during a tumultuous 10 days in the financial services industry that has included the federal government placing Fannie Mae and Freddie Mac into conservatorship, Lehman Brothers filing for bankruptcy and Merrill Lynch selling itself to Bank of America.
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