The Federal Reserve Board says it has authorized an additional $37.8 billion in credit to the American International Group Inc.
The loan is on top of the $85 billion in credit the Fed has already extended to AIG.
It authorized the Federal Reserve Bank of New York to borrow up to $37.8 billion in investment-grade, fixed-income securities from AIG in return for cash collateral, the Fed said.
Securities involved were from AIG’s U.S. life insurance subsidiaries, the insurer stated. Those subsidiaries had previously lent the securities to third parties, such as banks and investors, AIG said.
The transaction was different from the $85 billion loan, which at last report AIG had tapped for $61 billion, Nick Ashooh, a spokesperson for AIG, said.
The new credit arrangement provides overnight short-term liquidity to help the company return collateral that investors and other parties had supplied to obtain AIG securities loans, Ashooh said.
Under normal conditions, before the current credit crisis the company would have been able to relend those securities to other private parties, he explained.