just think...the guy responsible for shoveling more and more billions into the black hole aka AIG will be our next secretary of treasury :
December 24, 2008: 03:05 PM ET
NEW YORK -(Dow Jones)- A fund set up by American International Group Inc. ( AIG) and the Federal Reserve Bank of New York has bought an additional $16 billion in collateralized debt obligations insured through credit-default swap contracts.
The CDO purchases allow AIG to cancel an equivalent amount of swaps contracts that its finance subsidiary had written on those securities, relieving some of the financial pressure that had led the government to step in to help the troubled insurance giant in September.
The Maiden Lane III fund paid $6.7 billion to buy the latest batch of CDOs, while swaps counterparties kept $9.2 billion of collateral.
So far, Maiden Lane III has bought $62.1 billion of such CDOs at a cost of about $24.3 billion, AIG said, adding that it is looking for ways to eliminate the remaining $12.3 billion.
Maiden Lane III was created by AIG and the New York Fed last month to try to resolve the insurance firm's bad bets on credit-default swaps contracts. AIG invested $5 billion in equity and the Fed has agreed to lend up to $30 billion.
The entity will collect cash flows from the CDOs to first pay off the Fed's loan and then repay AIG's equity investment. After that, if there are any profits, they would be split 67% to the Fed and 33% to AIG.
Washington initially rescued AIG in mid-September, when the insurer faced possible bankruptcy, by lending it as much as $85 billion at high interest rates. Since then, the government has twice agreed to change the deal.
Initially, it increased the possible loan to nearly $123 billion. Then, in mid-November, it agreed to a new package valued at about $150 billion - of which as much as $60 billion is a loan - that slashed AIG's interest rate on the loan.
AIG is planning to sell much of its life-insurance businesses around the world, as well as its aircraft-leasing unit, in hopes of raising tens of billions of dollars.
AIG shares closed up a penny to $1.56 Wednesday.
-By Mike Barris, Dow Jones Newswires; 201-938-5658; mike.barris@dowjones.com
(Matthew Cowley contributed to this report.)
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