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The US Federal Reserve has agreed to lend up to US$85 billion (A$105 billion) to AIG as an emergency loan for the battling insurance giant.
The central bank decided to make the loan after determining that a “disorderly failure” of the insurer could add to “already significant levels of financial market fragility” and lead to higher borrowing costs, reduced household wealth and a materially weaker economy.
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The loan facility, which has a 24 month term, is designed to help AIG sell parts of its business in an “orderly manner, with the least possible disruption” to the economy.
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