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US Financial Crisis goes on: AIG makes Fed reverse its position

Wed, Sep 17 2008, 15:24 GMT
by Sandra García, Mauricio Carrillo, Noemi Jansana

FXstreet.com


Dollar/EuroThe US government has changed its no-more-money's position in order to support American International Group, AIG, the American biggest insurer by assets. The Fed concluded, in its yesterday's Statement, that a disorderly failure of AIG could make the financial market even more fragile. 
Six hours after the FOMC decision of leaving rates unchanged, the Fed used the section 13(3) of the Federal Reserve Act to save AIG under severe conditions.   
The Fed, supported by the Treasury Department, lent up to $85 billion dollars to AIG, which gives the government a majority stake -80%- to try to avert the worst financial collapse in postwar history. 
Last week, the credit crunch sent companies scrambling for funds. Lehman's (the fourth-largest U.S. investment bank) debts was noted at $668.6 billion (Morgan Stanley, with $1 trillion, and Merrill Lynch, with $988 billion.). The bail-out package for Lehman was broken down and it has filed for Chapter 11 bankruptcy-court protection.

Read the Official Statement from the Federal Reserve website.

Read the Supplementary Financing Program of U.S. Treasury Department


In-Depth Analysis

Published on  Wed, Sep 17 2008, 16:19 GMT


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