AIG gets new $40 billion bail-out

Insurance company American International Group Inc. will receive additional financial aid from the government, bringing the total rescue package for the firm to about $150 billion.┬á The US plans to buy $40 billion of preferred shares and reduce the original loan that was given to bail-out AIG from $85 billion to $60 billion. The Federal Reserve said today that the government will also purchase $52.5 billion of mortgage securities owned or backed by the company. ┬á The news of the aid comes after AIG recorded a fourth straight quarterly loss. The company reported a net loss for the third quarter of 2008 of about $24.5 billion, compared to a 2007 third quarter net income of $3.09 billion. ┬á ÔÇ£Third quarter results reflect extreme dislocations and volatility in the capital markets and significant charges related to restructuring activities,ÔÇØ comments AIG Chairman and CEO Edward M. Liddy on the companyÔÇÖs third quarter 2008 results. ÔÇ£Reported earnings are not indicative of the underlying core earnings power of our insurance businesses, which remains solidly capitalized. Retention of our customers remains strong and reflects the support and loyalty of our long-term partners, intermediaries and sponsors.ÔÇØ ┬á The $40 billion comes from the Trouble Asset Relief Program (Tarp), and is the first time funds from the $700 billion bail-out package have been given to a company that is not a bank. ┬á AIGÔÇÖs original rescue package was disclosed in September, a day after investment bank Lehman Brothers Holdings Inc. was allowed to collapse. The US reversed its opposition to a bail-out for AIG when the Federal Reserve noted that the failure of the insurance company would ÔÇ£add to already significant levels of financial market fragility.ÔÇØ ┬á The government said the $40 billion was needed to ÔÇ£keep the company strong and facilitate its ability to complete its restructuring process successfully.ÔÇØ