AIG is rescued by the Government with an $85 billion Fed Loan

American International Group averted the worst financial collapse in history by accepting an $85 billion federal loan and giving the government a majority stake, 80%. The U.S. reversed its opposition to a bailout of AIG, the nation's biggest insurer by assets, after private efforts failed and the Federal Reserve concluded that ``a disorderly failure of AIG could add to already significant levels of financial market fragility,'' according to a Fed statement late yesterday. ``It's an enormous relief,'' said David Havens, credit analyst for UBS AG in Stamford, Connecticut. ``Nobody really knows what it would have meant if they would have been allowed to fail, but there was an enormous amount of systemic risk. The problem was, nobody really knew how bad it could have been.''

The sterling fell against the euro and was little changed versus the dollar before the Bank of England publishes minutes of its latest interest-rate meeting and a government report that may show jobless-benefit claims rose. ``The MPC minutes to be released today take on added importance in light of the mounting financial risks to the U.K.,'' a team headed by New York-based Gabriel de Kock, senior currency strategist at JPMorgan Chase & Co., wrote today in a report. ``Should the minutes show little sign of flexibility that would allow a rate cut soon, euro-pound could retrace some of the past fortnight's decline.'' The MPC minutes were called at 1-8 to hold. The GBP/USD is currently trading at $1.7825 as of 8:33am, GMT.

The Japanese JPY dropped versus the Australian dollar on speculation an AIG rescue will encourage investors to take out loans in Japan to buy higher- yielding assets overseas. The yen jumped the most in a decade against the dollar on Sept. 15th as mounting credit-market losses forced Lehman Brothers Holdings Inc. to file the biggest bankruptcy in history, sparking global stock turmoil. The USD/JPY is currently trading at 105.50 as of 8:14am, GMT.

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