Mortgage Woes Prompt New AIG Aid

The Federal Reserve has authorized another $37.8 billion in aid for insurer American International Group, which continues to struggle with liquidity and capitalization concerns that are partially mortgage-related. "Under this program, the New York Fed will borrow up to $37.8 billion in investment-grade, fixed-income securities from AIG in return for cash collateral," the Fed said. "These securities were previously lent by AIG's insurance company subsidiaries to third parties." The Fed added that, "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 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."