AIG permitted to borrow from subsidiaries
The Federal Reserve Board today said it would allow AIG to borrow up to $37.8 billion from some of the embattled insurer’s subsidiaries.
The Federal Reserve Board today said it would allow AIG to borrow up to $37.8 billion from some of the embattled insurer’s subsidiaries.
Under this new borrowing program, American International Group Inc. of New York will loan the additional funds to the New York Fed in return for cash collateral.
Before, the company’s insurance subsidiaries had loaned these investment-grade fixed-income securities to third parties.
The Fed’s new loan program is intended to allow AIG to replenish its liquidity as it borrows from the $85 billion federal bailout loan it received last month to help settle securities lending transactions with other investors.
Additionally, the Federal Reserve Board said that it has protected both the New York Fed and the American taxpayer by providing them with a security interest in these securities.
The extra cash comes in a day after the Committee on Oversight and Government Reform grilled ex-AIG executives Martin J. Sullivan and Robert B. Willumstad about the company’s regulatory errors and excessive spending that led to its bailout last month. That hearing also revealed that AIG General, a life insurance subsidiary based in Houston, had sent its top agents to weeklong spa retreat at the St. Regis Resort in Monarch Beach, Calif., racking up some $442,000 in expenses after the parent company received its federal lifeline.
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