Fed Gives AIG Another $37.8 Billion Credit

In a statement, the Fed said, “As expected, drawdowns to date under the existing $85 billion New York Fed loan facility have been used, in part, to settle transactions with counterparties returning these third-party securities to AIG.”

This new loan program “will allow AIG to replenish liquidity used in settling those transactions, while providing enhanced credit protection to the New York Fed and U.S. taxpayers in the form of a security interest in these securities,” the Fed said.

The borrowings by the New York Fed “will allow AIG to replenish liquidity to the securities lending program on an as-needed basis, while providing possession and control of these third-party securities to the New York Fed,” the AIG announcement said.

The company reported that as of Monday, about $37.2 billion of securities were subject to loans under AIG’s securities lending program.

Under the lending agreement, the New York Fed will borrow investment grade fixed-income securities on an overnight basis from the subsidiaries in return for cash collateral, AIG said.

The company added that it “understands that the New York Fed is prepared to borrow securities to extend AIG’s currently outstanding lending obligations where those obligations are not rolled over or replaced by transactions with other private market participants.”