Lex reports on AIG’s rescue:
AIG was not too big to fail, but too connected. Bankruptcy would have in effect cancelled the debt insurance that AIG provided, and triggered emergency capital raisings from counterparties around the world. The Fed’s rescue is on punishing terms, AIG must repay the $85bn loan at a storecard-like 8.5 percentage points over Libor…
According to the FT:
AIG, the troubled insurer that sits at the heart of the financial system, has one more day to come up with the capital to stay afloat, according to David Paterson, New York governor. … Asked how much time he thought AIG had, Mr Paterson replied: “I think they have a day.”
According to the FT:
The head of equities at one of the UK’s biggest investors said the repercussions should AIG fail were “potentially bigger than Lehmans. It is too big to go bust. If it does, we will be eating baked beans out of a tin.”
Alarmist perhaps, but the article is worth reading: it does appear that AIG, like Fannie and Freddie, is too big to fail.
