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.

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.”