CNBC, The New York Times, The Wall Street Journal and other news organizations are reporting that American International Group Inc. has been scrambling to find capital.

AIG, New York, could sell valuable assets, get a short-term $40 billion “bridge loan” from the Federal Reserve Board, or take other steps to raise and reallocate billions of dollars in an effort to avoid a rating downgrade and to respond to demands for cash and collateral, according to news reports.

Members of the AIG board and officials from the New York State Insurance Department have been meeting with private equity firm representatives, representatives of other potential sources of capital, and officials from other agencies to come up with a response to an announcement that Standard & Poor’s Ratings Services, New York, issued Friday.

S&P placed its ratings on AIG and subsidiaries on CreditWatch with negative implications, noting that it wanted AIG to increase capital levels because of the increasing likelihood that AIG may have to pay cash to counterparties in connection with credit swaps involving AIG.

“This action follows a significant decline in AIG’s share price and an increase in credit spreads on the company’s debt,” S&P says in a discussion of the CreditWatch move.

The price of AIG shares fell 46% last week, to $12.14 Friday, and AIG shares now are selling for just $7.

S&P pointed out that AIG has suffered heavy losses over the past 3 quarters in connection with credit swaps that are insuring mortgage-backed securities.

AIG has pointed out in regulatory filings that ratings downgrades could force it to post billions of dollars in additional collateral.

In addition, some AIG policies carry clauses that nullify the contracts if AIG ratings fall below a certain level.

“We believe that AIG has sufficient capital and liquidity to meet its policy obligations and potential collateral requirements, which are significantly greater than the expected cash losses on the mortgage-related assets,” S&P credit analyst Rodney Clark says in a statement accompanying the Friday announcement. “However, additional market value losses will place some strain on the company’s resources. Given the movement in the share price and credit spreads, we now believe AIG’s potential access to the capital market may be more restricted in the short term.”

S&P could affirm the current ratings on the holding company and operating companies, or lower them by as many as 3 notches, S&P says.

AIG representatives could not immediately be reached for comment.

The news about AIG came as the news organizations reported that Lehman Brothers Inc., New York, has failed to find a buyer and will be seeking bankruptcy court protection, and that Bank of America Corp., Charlotte, N.C., will be acquiring Merrill Lynch & Company Inc., New York.

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