AIG (AIG) just persuaded New York Governor David Paterson to let it raid its subsidiaries’ coffers for $20 billion. This should help it avoid an immediate rating downgrade, which could have killed the company.
How did AIG persuade the governor to relax restrictions? By threatening to fire 30,000 people in the state.
This “bridge loan to itself” presumably will knock $20 billion off the $40 billion AIG was seeking from the Fed. And because AIG already had the money, the move won’t cost taxpayers anything (unless the firm just delays the inevitable and sucks down a few more tens of billions in loans that it later defaults on).
But this $20 billion certainly doesn’t represent “new capital.” And this, in turn, means that AIG’s position is almost as desperate as ever.
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