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U.S Federal Reserves Rescues AIG For A 79.9% Stake

The U.S. Federal Reserves loaned a mere $85 Billion to rescue the insurance giant American International Group Inc. (AIG), saving them from bankruptcy and on the other hand also saving the financial markets.

The action was taken up in a measure to save the Insurance giant and has been lended $85 Billion for two years in exchange for a 79.9 Percent Equity Stake.

This decision came two days just after U.S. Authorities had refused to save the Investment Bank 'Lehman Brothers Holdings Inc' , due to which it had to file for Chapter 11 Bankruptcy.

"Thank God," exclaimed Daniel Fuss, an influential bond manager who oversees more than $100 billion at Loomis, Sayles & Co in Boston. "AIG is interwoven with so many people and touches many companies around the world. This is a huge relief to many parts of the financial markets."

The Fed. had stepped in worrying that the collapse of AIG could cause far-reaching damage to the global financial system, although some people were seeing quoting as this government's step was only a short term relief but would do a long-term harm.

"What the U.S. government is doing is basically delaying the recovery of the economy really by keeping AIG alive and by going back to the printing press to issue more U.S. dollars, which long term should be negative to the U.S. dollar," said Ronald Chan, chief investment offer for Asian equities with Fortis Investments in Hong Kong, where he oversees about $1.5 billion. "Short-term, I think the systemic risk issue has been reduced on the fact that the Fed is seen to be coming out to save the market, but the recovery is going to be prolonged."


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