Fed takes over AIG

I don’t think they had any choice.

The Board determined that, in current circumstances, a disorderly failure of AIG could add to already significant levels of financial market fragility and lead to substantially higher borrowing costs, reduced household wealth and materially weaker economic performance.

AIG gets a 24 month loan loan at steep interest while they liquidate in an orderly manner. The government gets 80% of the company and the loan is collateralized by all assets of AIG.

The loan is expected to be repaid from the proceeds of the sale of the firm’s assets. The U.S. government will receive a 79.9 percent equity interest in AIG and has the right to veto the payment of dividends to common and preferred shareholders.

Next up, Wachovia and Washington Mutual.

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