Notes from Fed Conference Call Tonight
The Federal Reserve held a conference call for reporters tonight, and here (via Dow Jones) are some bullet points on the AIG bridge/bailout:
- The market was viewed as better able to handle a Lehman bankruptcy than an AIG one. The latter was more complex, and more likely to touch consumers.
- The collateral includes the stock of the almost all of the company's regulated units; these will remain regulated.
- All of the companies businesses will continue operating as normal.
- The Fed can veto any AIG asset sales and purchases as well as dividend payments.
- The government plans to replace senior management and keep the company's board of directors in place for now.
- The loan is designed to buy AIG's new management time to meet its obligations and continue running the firm. Any amount drawn down will carry an interest rate of three-month Libor plus 850 basis points.
- The Fed expects the loan to be repaid through asset sales, although the company could decide to pay it down through revenue or even a full liquidation if it chooses.
