Even if AIG stops the bleeding, the insurance company must take immediate steps to sell some of its assets, including its aircraft leasing business, and start to repay the Fed loans. Taking money from the Fed to pay the Fed raises some questions.
This new facility means AIG had $143.8 billion in loans and funding from the federal bailout funds, an enormous amount that's nearly twice the expected amount when the original loan was advanced to the shock of many who had been focused on the potential of an asset loan of $20 billion that the National Association of Insurers and the State of New York brokered when the Fed originally refused a $40 billion bailout package in September.
Norton explained that because AIG made the repayment on a voluntary prepayment basis "this does not reduce the credit line," meaning that the money could be withdrawn again if AIG chose to do so. He said "when asset sales are applied, that will be a permanent reduction in the facility." Norton was unable to confirm his belief that any undrawn credit line would remain available in the event of a permanent reduction in the facility.
The federal funding of AIG has grown exponentially and appears massive considering it took two attempts to pass legislation and the suspension of Sen. John McCain's (R., Ariz.) presidential election campaign for the $700 billion bailout package approval for the whole country. Recognizing that AIG has its own special bailout package, the company will have cornered more than 20% of the bailout funding figure all on its own. That's an incredible amount.
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