More bailout for AIG after $60 billion loss

Additional funds are needed to the troubled insurer American International Group (AIG) to stay afloat after it announces the losses of $60 billion, largest in the U.S. corporate history, next Monday. With the huge loss which was accumulated in the course of write-downs on assets including commercial real estate the company is likely to face downgrades and hence it will need to raise collateral that it actually does not have.

The situation is that the bankruptcy of AIG would have a significant impact on a number of financial institutions still relying on the company as an insurer against losses on loans and other debts. AIG was saved from bankruptcy by the government’s $85 million bailout investment and so far the Fed and the Treasury provided more than $150 billion of aid to AIG which resulted in that the federal government now owns 79.9% of the company, a critical limit that cannot be exceeded. Thus the officials are beating their brains over how to transfer additional financing to the agonizing insurer.

The agreement is scheduled to be drafted on Sunday. In case the deal don’t work the company will definitely go bankrupt. Yet observers say that taking into account government’s control over the company its bankruptcy won’t have system effect on the industry.