AIG Draws $2.4 Billion From Fed Credit Line, Most Since October


Just a day after the hearings investigating the taxpayer bailout and subsequent cover-up of the beneficiaries of taxpayer largesse up on Capitol Hill, AIG apparently needs more money.  It appears they are burning through taxpayer money at the rat e of $1 Billion a week!

AIG Draws $2.4 Billion From Fed Credit Line, Most Since October

By Hugh Son

Jan. 28 (Bloomberg) — American International Group Inc., the bailed-out insurer whose borrowing through a U.S. commercial paper program was set to expire this month, increased its draw on a Federal Reserve credit line by the most since October.

AIG owes $25.8 billion on the line, about $2.4 billion more than last week, according to Fed data released today. The draw has increased for six straight weeks. The company said in November that it may borrow additional funds from its five-year Fed credit line to make payments on maturing commercial paper.

“This helps to highlight the risks we’re exposed to as citizens standing behind AIG,” said Bill Bergman, an analyst at Morningstar Inc. in Chicago. “While there’s much more liquidity in markets as a whole, lenders are still being selective.”

AIG, which got a $182.3 billion government bailout, had relied on the U.S. commercial paper program as firms including MetLife Inc. and General Electric Co. reduced their use of government-backed funds. New York-based AIG said it lost access to its traditional sources of liquidity after its 2008 rescue.

Commercial paper is used by companies to finance daily expenses such as payroll and rent. The Fed, which started a program in October 2008 to bolster the market after the Lehman Brothers Holdings Inc. bankruptcy, said it may wind down the facility in February. Lending through the program peaked a year ago at $350 billion.

Mark Herr, a spokesman for the insurer said the increase was fueled by the need for funds to repay expiring commercial paper. He declined to comment further.

Life Insurance

AIG paid down its Fed line by about $25 billion in December by handing over stakes in two non-U.S. life insurance units. The company has said it plans to sell American International Assurance Co. and American Life Insurance Co. to rivals or private-equity buyers or in initial public offerings “depending on market conditions.”

AIG said in November that it will need to repay $23.2 billion in maturing debt, excluding commercial paper, in the four quarters ending September 2010. The insurer said it will make the payments with revenue from its businesses, proceeds of asset sales, dividends from subsidiaries and the Fed credit line.

MetLife, the largest U.S. life insurer, had no borrowing through the commercial paper program at the end of the third quarter, compared with $1.65 billion on Dec. 31, 2008. GE, which competes against AIG in the plane-leasing business, used the program in the fourth quarter of 2008, and didn’t expect to tap it again, the Fairfield, Connecticut based company said in a filing.

Plane Leasing

AIG has tapped a separate Treasury Department facility for $4.2 billion to help restructure its money-losing mortgage guarantor and the plane unit it was trying to sell, the insurer said in November. AIG got the $29.8 billion facility in April as part of its fourth bailout.

The insurer’s rescue includes a $60 billion Fed credit line, a Treasury investment of as much as $69.8 billion, and up to $52.5 billion to buy mortgage-linked assets owned or backed by the company.

AIG said in a November filing that it may “borrow additional funds” from the Fed credit line to make payments on the $5.8 billion in commercial paper that matures in January.

The draw has climbed by $5.9 billion in the past six weeks. The latest increase marked the biggest weekly gain since the end of October, when it surged by about $3.6 billion.

To contact the reporter on this story: Hugh Son in New York at [email protected];