American International Group Inc. has authority from the Federal Reserve Board to use the agency’s credit facility to provide liquidity for its insurance operating subsidiaries, the Fed says.
The Federal Reserve Bank of New York issued a bulletin earlier this week confirming that the insurance operations of AIG, New York, have access to the credit facility.
An official at the New York State Insurance Department, which is serving as the facility liaison for state regulators, the Fed and AIG, also confirmed that the insurance subsidiaries have credit facility access.
The New York Fed set up the $85 billion credit line Sept. 16 to help AIG meet collateral demands linked to credit default swaps.
AIG sold the contracts to insure financial institutions that invested in asset-backed securities.
The underlying securities dropped in value, and AIG’s credit ratings also deteriorated.