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Strategies & Market Trends : Mish's Global Economic Trend Analysis -- Ignore unavailable to you. Want to Upgrade?

To: NOW who wrote (85311)	9/16/2008 3:35:24 PM
From: Sr K	Read Replies (1) \| Respond to of 116555

Fed Said to Reverse Stance, Consider AIG Loan Package (Update2) By Erik Holm and Hugh Son Sept. 16 (Bloomberg) -- The Federal Reserve is considering extending a ``loan package'' to American International Group Inc., the insurer facing a cash shortage, according to a person familiar with the negotiations. The stance by federal regulators is a reversal from a position they held as late as last night, and people with knowledge of the talks are ``cautiously optimistic,'' said the person, who declined to be identified because negotiations are confidential. The person gave no timetable for reaching an agreement or estimate on how much money New York-based AIG would need. New York Fed spokesman Andrew Williams declined to comment and AIG spokesman Nicholas Ashooh didn't immediately return a call seeking comment. Treasury spokeswoman Jennifer Zuccarelli had no immediate comment. AIG is searching for capital to stave off a collapse after its credit ratings were cut late yesterday. AIG's fight to stay afloat is the latest tremor to shake the global financial industry, less than a day after Lehman Brothers Holdings Inc. filed for Chapter 11 bankruptcy protection and Merrill Lynch & Co. sold itself to Bank of America Corp. ``To the extent that a bridge loan or some type of liquidity provision allows AIG time to sell some assets on its balance sheet and time to maintain it's investment-grade rating at A or higher, I think it's a good move,'' Bill Gross, co-chief investment officer of Newport Beach, California-based Pacific Investment Management Co. said in a Bloomberg TV interview. `A Necessary Step' ``The Fed doesn't have to necessarily put its own capital at risk,'' Gross said. ``We'll see what the plan says, but I think it's definitely a necessary step.'' Goldman Sachs Group Inc. and JPMorgan Chase & Co. were working with AIG to determine how much the insurer needs, said two people familiar with the talks yesterday. Goldman has helped the Fed appreciate the effects that an AIG collapse would have on financial institutions, the first person said. AIG declined 37 cents, or 7.8 percent, to $4.39 at 3:22 p.m. in New York Stock Exchange composite trading, paring losses from earlier in the day when it was down 74 percent. Senate Banking Committee Chairman Christopher Dodd warned the Fed and Treasury against a rescue of AIG without checking with him first, expressing anger about past incidents where he was only informed afterwards. He also said he was skeptical that AIG merited aid while Lehman didn't. ``Tell me why this situation is different from Lehman,'' he said today. ``I'm willing to listen.'' -- With reporting by Kathleen Hays, Andrew Frye, Josh Fineman and Andrew Frye in New York and Chris Anstey and Rebecca Christie in Washington. Editors: Rick Green, Dan Kraut To contact the reporter on this story: Erik Holm in New York at eholm2@bloomberg.net; Hugh Son in New York at hson1@bloomberg.net. bloomberg.com