Updated from 7:34 p.m. EDT
American International Group (AIG Quote) will receive an $85 billion bridge loan from the Federal Reserve aimed at keeping the giant insurer out of bankruptcy and preventing the acceleration of a world credit crisis.
AIG shares fell to as low as $2.42 in extended trading after reports spread of the agreement, which calls for the government taking an 80% stake in the company.
"The [Federal Reserve] Board determined that, in current circumstances, a disorderly failure of AIG could add to already significant levels of financial market fragility and lead to substantially higher borrowing costs, reduced household wealth, and materially weaker economic performance," the central bank said in statement posted on its Web site at 9 p.m. EDT Tuesday. ...
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