Unprecedented federal bailout for US insurer
Updated
![America's biggest insurer AIG has been bailed out by Washington. [Reuters]](http://www.radioaustralia.net.au/img/news/base/us_aig_rtr_160908.jpg?<BR> "America's biggest insurer AIG has been bailed out by Washington. [Reuters]")
America's biggest insurer AIG has been bailed out by Washington. [Reuters]
The United States central bank, the Federal Reserve, has used emergency powers to rescue troubled insurer, American International Group.
In an unprecedented move, the Federal Reserve and the US Treasury will loan AIG nearly $US85 billion to save the insurance giant from bankruptcy.
The Federal Reserve says a disorderly collapse of AIG could add to the volatility on global financial markets and lead to substantially higher borrowing costs.
The US Government will take a nearly 80 per cent stake in the insurer and the right to veto the payment of dividends to shareholders.
AIG will need to sell assets to repay the loan, which will be due in two years time.
The move comes after AIG said it needed up to $75b to stay afloat and its shares plunged on Wall Street amid fears of its collapse.
