AIG: NY State Steps Up, but Needs More Help
- Sep 16, 2008
AIG is getting hammered, and according to some industry watchers may have only a day or two to find sufficient funding or declare bankruptcy. As of this morning, although the Federal Reserve had declined to extend a bridge loan to American International Group, its New York branch was in talks with Goldman Sachs and JP Morgan about raising an emergency fund for AIG. As this appeared to fall apart later in the day, AIG hopes slumped. Then after hours, a Bloomberg News report unnamed sources suggesting that a Fed conservatorship might be an option. That was later followed by a Reuters News report late in the afternoon, that advised that the U.S. Treasury would not comment on the on any such involvement. Reuters described the possible Fed move as “extending a loan package” to AIG. Meanwhile, Moody’s lowered its rating on AIG’s senior unsecured debt from AA3 to A2, citing “significant execution risks” to a bailout plan. If any rescue effort is going to succeed, it’s clear that it has an extremely tight window. New York Gov. David Paterson told CNBC this morning that AIG has probably a day to settle on and start executing a plan. News reports indicate that AIG has already engaged the law firm of Weil, Gotshal & Manges, which is handling the Lehman Brothers bankruptcy. Paterson emphasized the potential ancillary effects of an AIG bankruptcy, noting that the Wall Street problems so far this year have probably already cost the State of New York a billion dollars in lost tax revenue. The governor predicted that if AIG falls, the repercussions could require the state to eliminate thousands of jobs.