US government rescues insurer AIG

US traders, 16 September 2008

The US Federal Reserve has announced an $85bn (£48bn) rescue package for AIG, the country’s biggest insurance company, to save it from bankruptcy.

AIG will get an $85bn loan, in return for an 80% public stake in the firm.

The rescue follows the collapse of US investment giant Lehman Brothers, which caused share prices to plummet across the world’s financial markets.

Meanwhile, Barclays said it had reached a deal to buy Lehman’s US investment banking and capital markets businesses.

The $250m deal, which is subject to approval from the bankruptcy court, will make the British bank the third biggest investment bank in the US.

Barclays will also purchase Lehman’s New York headquarters and its two data centres in New Jersey for $1.5bn.

The rescue of AIG – which has a trillion dollars in assets and insures bank loans around the world – prompted a shares rally in Asia, with Japan’s market up 2% in early trading.

The board of the Federal Reserve made the decision "with the full support of the Treasury Department", it said in a statement, adding that the secured loan included conditions designed to protect "the interests of the US government and taxpayers".

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