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The Federal Reserve gave troubled insurance company American International Group (AIG) an $85 billion loan on September 16, 2008 in return for an 80% stake in the company. Without the influx of cash, the massive insurance company would have had to file for bankruptcy, a move which could have sent world financial markets into a tailspin.The New York Times: Fed to Give AIG $85B Loan and Take 80% Stake (September 16, 2008)
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Fast Facts
- Amount of loan: $85 billionThe New York Times: Fed to Give AIG $85B Loan and Take 80% Stake (September 16, 2008)
- Federal Reserve receives 80% stake in AIGThe New York Times: Fed to Give AIG $85B Loan and Take 80% Stake (September 16, 2008)
- AIG on verge of bankruptcy due to mortgage crisisThe New York Times: Fed to Give AIG $85B Loan and Take 80% Stake (September 16, 2008)
- Loan designed so AIG can sell assets without declaring bankruptcyThe New York Times: Fed to Give AIG $85B Loan and Take 80% Stake (September 16, 2008)
- Federal Reserve acted only after efforts to secure private loan fell throughThe New York Times: Fed to Give AIG $85B Loan and Take 80% Stake (September 16, 2008)
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AIG's Troubles
AIG got into trouble in 2008 when the mortgage-backed securities it had invested billions of dollars into began to rapidly lose value during the mortgage crisis. AIG attempted to secure funds to keep itself afloat at the same time that investment banks Merrill Lynch and Lehman Brothers were frantically searching for buyers. Merrill Lynch was purchased by Bank of America, and Lehman Brothers declared bankruptcy. If AIG had not secured the Federal Reserve loan, it almost certainly would have been forced to declare bankruptcy.The New York Times: Fed to Give AIG $85B Loan and Take 80% Stake (September 16, 2008) -
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View All AIG Federal Reserve Loan Questions (461) | Ask a QuestionHow does a bank move money into the federal reserve? (1 Answer)They can place money on deposit with the Federal reserve just like you can place money on deposit with your bank. They have an account. Although they have massive powers, ... read moreHas money supply historical not been stored in federal reserves but invested by the banks? (1 Answer)Q: Has money supply historical not been stored in federal reserves but invested by the banks? A: First of all, it depends upon which part of the world you're talking ... read moreFederal Reserve Note is at the top of our currency now what was written before that? (1 Answer)Before the elimination of the Gold Standard, these notes were Silver Notes. Just as they say "This note is legal tender for all debts, public and private" they once also ... read moreHow does the Federal Reserve work? Banks in general? (4 Answers)The Federal Reserve is not a Government entity. They are a private centralized bank of the USA. They print IOU's that we call the dollar. The dollar is actually the ... read more
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