AIG Gets $37 Billion More From Government

Over the past couple of days, newswires swarmed with the story of the $440,000 taxpayer-financed resort trip for AIG executives, paid for with funds from their emergency $85 billion government loan. Nevertheless, the Federal Reserve announced the authorization of a new $37.8 billion cash infusion Wednesday.

AIG entered into a lending securities agreement with the Federal Reserve Bank of New York Wednesday. In the agreement, the New York Fed will take up to $37.8 billion in investment grade fixed income securities from AIG subsidiaries in return for cash collateral.

According to the Federal Reserve this infusion will allow AIG to replenish its liquidity.

AIG spokesman Nicholas Ashooh said in a statement, “This gives us the liquidity and flexibility we need to work on long-term solutions.”

Gary Ransom, insurance industry analyst at Fox-Pitt Kelton, told USA Today, "Companies that borrowed stock from AIG – presumably to sell short – are putting the stock back to them for the return of collateral."

AIG received an $85 billion emergency loan from the Fed last month after the government determined it was “too big to fail.” There is controversy surrounding reports that AIG used some of the loan money for a resort week in California for its executives. AIG stated that the resort was planned before the loan was given, and that it would sell its assets to repay the loan.

News released Wednesday stated that AIG planned to hold a meeting for its brokers at the Ritz Carlton in California. Thursday afternoon, USA Today said that the retreat was canceled to focus on paying back the Fed loan.

AIG shares fell 24 percent Thursday to $2.39.