The
US government provided an $85 billion-dollar emergency loan to rescue
AIG. The Fed claimed that a disorderly failure of AIG could potentially hurt the already struggling financial markets and economy.
The Fed cited that poor handling of the situation could “lead to substantially higher borrowing costs, reduced household wealth, and weaker economic performance.”
White House spokesman Tony Fratto released a statement claiming that President Bush supports the Fed’s decision.
In return for the loan, the Fed said the government will receive a 79.9% equity stake in AIG. The government hopes its move can help bring stability to the financial markets and limit the damage to the economy.