The federal government today announced a new, bigger bailout for American International Group.
The plan calls for the to buy $40 billion AIG stock. The revised package adds another $27 billion to help the company, bringing the total federal money to $150 billion.
As The Wall Street Journal reports today, the terms will reduce the interest rate on the original loans, which didn’t succeed in stabilizing the foundering insurance giant. The new agreement also extends the loan repayment period from two years to five years.
The new package answers the complaints of AIG stockholders that the company was being forced to sell off assets at bargain-basement prices in order to meet the loan requirements.
The announcement follows AIG’s report today of more than $24 billion in losses during the third quarter, compared to a profit of $3 billion a year ago.
The New York Times notes today that the deal “makes the government a long-term investor in AIG, something that Treasury Secretary Henry M. Paulson Jr. had said he hoped to avoid.”
Edward M. Liddy, who took over as chairman and CEO of AIG after the government bailout, praised the new package this morning.
“We’re going to emerge from this as a smaller, nimbler company,” he told CNBC.
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