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Federal Reserve to bail out AIG


From Bloomberg.com

Sept. 17 (Bloomberg) — American International Group Inc. lost 44 percent of its remaining value in early trading after investors learned that the U.S. rescue will curb the insurer’s dividends and wipe out most of their stake. AIG fell $1.66 to $2.09 as of 9:17 a.m. in New York. The U.S. plan to save the New York-based company, the nation’s largest insurer by assets, may give the government an 80 percent stake in return for an $85 billion loan, and dividends may be halted to common and preferred stockholders. They’re already reeling from a 94 percent drop in the common shares this year.

AIG unraveled as the worst housing crisis since the Great Depression led to more than $18 billion of losses in the past year. The U.S. reversed its opposition to a bailout of AIG, after private efforts collapsed and the Federal Reserve concluded that “a disorderly failure of AIG could add to already significant levels of financial market fragility,” according to a Fed statement late yesterday.

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