AIG Reaches Deal To Avert Fiscal Crisis

Following negotiations throughout this past weekend with New York state officials, the American International Group Inc. (AIG) has managed to avert a liquidity crisis.

The reprieve comes after state Govenor David Paterson agreed to enable AIG to access $20 billion of its own capital and transfer funds to its parent company and subsidiaries.

The insurer’s shares plummeted by more than 55 per cent and it has posted total losses of $18 billion over the past three fiscal quarters.

Most of the losses are due to mortgage based securities that are linked to the sub-prime market implosion that has plagued the U.S. investment community over the past 18 months.

New York’s Governor became involved in an effort to protect upwards of 8,600 employees who work at AIG state-wide and 6,000 in Manhattan alone.

He has also announced he is appealing to the federal government to also provide some access to capital to facilitate AIG’s survival.

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