New York Governor Says AIG Can Access $20 Billion (Update1)
By Hugh Son and Andrew Frye
Sept. 15 (Bloomberg) -- American International Group Inc., the largest U.S. insurer by assets, has been given special permission to access $20 billion of capital in its subsidiaries to free up liquidity, New York Governor David Paterson said.
The move ``is not a government bailout,'' Paterson said today at a New York City press conference. The arrangement allows AIG to make a bridge loan to itself, and the New York- based insurer remains ``extraordinarily solvent,'' he said.
AIG may need to raise $20 billion in capital and sell $20 billion of assets to ease a cash crunch brought on by the collapse of U.S. mortgage markets, people familiar with insurer's plans said. Prospects dimmed today when Lehman Brothers Holdings Inc. went bankrupt after failing to find new funds or a buyer. Bank of America Corp. Chief Executive Kenneth Lewis said today AIG's failure would be a ``much bigger problem'' than Lehman's demise.
AIG has a ``liquidity problem'' and will be able to use assets held by units as collateral for cash to run the ``day to day operations'' of the insurer, Paterson said. ``We have seen some of the companies that serve as the bedrock of our financial system unraveling before our eyes,'' Paterson said.
AIG plunged as much as 71 percent in New York trading. The stock was down 50 percent to $6.05 a share as of 12:30 p.m. in New York Stock Exchange composite trading after Paterson's statement.
Eric Dinallo, the New York State insurance superintendent, has become the lead regulator charged with finding a solution to AIG's financial crunch, according to two people familiar with the situation. The people declined to be identified because talks between Dinallo and AIG are confidential.
-- Editors: Rick Green, Dan Kraut
To contact the reporter on this story: Hugh Son in New York at hson1@bloomberg.net
Last Updated: September 15, 2008 12:42 EDT |
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