SkyNews – “US Giant Bailed Out By $85bn Loan”

http://uk.news.yahoo.com/skynews/20080917/twl-us-giant-bailed-out-by-85bn-loan-3fd0ae9.html

US Giant Bailed Out By $85bn Loan

SkyNews | September 17, 2008

The Federal Reserve has authorised a $85bn deal to bail out the struggling insurance giant AIG.

It follows much speculation about the fate of the firm following the collapse of Lehman Brothers and the ensuing world financial uncertainty.

The plan is aimed at saving the insurer from a “disorderly failure” that could wreak economic havoc.

A central bank statement said the Federal Reserve Board made the decision “with the full support of the Treasury Department” under Section 13(3) of the Federal Reserve Act.

“The secured loan has terms and conditions designed to protect the interests of the US government and taxpayers,” the statement said.

The Fed said under the two-year facility the US government will receive a 79.9% equity interest in AIG.

“The Board determined that, in current circumstances, a disorderly failure of AIG could add to already significant levels of financial market fragility and lead to substantially higher borrowing costs, reduced household wealth and materially weaker economic performance,” the Fed said in a statement.

US Treasury Secretary Henry Paulson, in a separate statement, said that US financial regulators were engaged in an effort to try to restore some stability to battered financial markets.

Barclays also announced it had agreed to buy part of collapsed Lehman Brothers in a $250m deal.

The shock collapse of Lehman Brothers has thrown the world’s financial markets into turmoil with shares nosediving across the globe.

In Tokyo, Japan’s Nikkei opened at almost 2% up, recovering slightly from yesterday’s plunge. It was a similar response in Hong Kong where share prices were up more than 2% on the Hang Seng.

In the US, Wall Street recovered from its worst day since 9/11 by closing up over 1%.

And in Britain the index of 100 leading shares closed more than 3% down – it is hoped it will perform better when it opens at eight later this morning.

British banks have seen millions wiped off the value of their shares.

There are concerns for HBOS, after its shares dropped by more than 20%, while the Royal Bank of Scotland was down over 10%.

Meanwhile, one employee has told Sky News of the shock of the unfolding events.

The worker, who did not want to be named, said staff were vexed by the “surreal” unfolding events.

They have been told they may not get paid for a month’s work – and may have to pay their own expenses bill.

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Published in: on September 17, 2008 at 6:54 AM  Leave a Comment  

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