WASHINGTON: The US government has agreed to provide an $85 billion emergency loan to rescue the huge insurer AIG, the The Federal Reserve said on Tuesday. The Fed said the US Treasury Department was in full support of the decision.
The Fed determined that a "disorderly failure" of AIG could undermine already fragile financial markets.
The government will receive an 79.9 percent equity stake in AIG, the Fed said
The deal would avoid the biggest corporate bankruptcy ever and follows a government bailout of mortgage lenders Freddie Mac and Fannie Mae just over a week ago.
Earlier, US stocks clawed back from their biggest one-day drop in seven years, soothed by speculation about a government rescue of AIG, a likely sale of Lehman Brothers' investment bank to Britain's Barclays, and a better-than-expected quarterly profit from Goldman Sachs.
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