Fed Line of Credit to AIG
Data File:
Date:
September 16, 2008
Policy Area:
Financial Sector Policy
Economic Target:
AIG
Action Type:
Loans
Maximum Amount:
$60.00 billion The Fed originally created a credit-lending facility from which AIG was allowed to draw up to $85 billion. After a $40 billion loan from TARP funds, the Fed's line of credit was reduced to $60 billion.
On 3/2/2009, the Federal Reserve and Treasury announced another major restructuring of its support for AIG. The Fed's existing $60 billion dollar credit facility will be reduced to a minimum value of $25 billion and supplemented by several other forms of support:
The Fed will provide up to $26 billion in financing in exchange for preferred interest in a special purpose vehicle that was created to hold the common stock of two AIG life insurance subsidiary companies, the American Life Insurance Company and the American International Assurance Company.
Additionally, the Fed will provide new loans worth up to $8.5 billion dollars to a special purpose vehicle of AIG's life insurance subsidiaries, which would repay the loans from income generated by its existing life insurance policies.
Altogether, the Fed's actions should still achieve a total value of approximately $60 billion (minimum of $25 billion in revolving credit facility, $26 billion for in preferred interests in SPV, and $8.5 billion in new loans). The level of Fed funds currently committed through these channels is unknown.
On 1/14/2011, Treasury announced that the AIG recapitalization plan had been completed, meaning that the line of credit to AIG had been fully repaid.
Notes:
Amount spent is current as of 1/19/2011 (http://www.federalreserve.gov/releases/h41/Current/). Activities of the Federal Reserve are not directly recorded in the federal budget. However, each year the Federal Reserve remits a portion of its earnings to the general treasury. This remittance is generally in the range of $20-$30 billion per year, but the CBO estimates that the Fed's earnings will be lower by approximately $90 billion over the next ten years.