Ailing insurer American International Group (AIG) has been saved from the brink of collapse through a multibillion-dollar rescue package from the US Government.
The Federal Reserve swooped in to save the world's largest insurer on Tuesday night, offering up to $85 billion over two years in return for an 80% stake in the firm. After bailing out stricken mortgage lenders Fannie Mae and Freddie Mac last week, the Government refused to throw beleaguered Lehman Brothers a lifeline.
However, as most major banks have dealings with AIG, its collapse would have had devastating consequences on the rest of the financial world. The Fed said that 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.
Now the question is whether AIG will bounce back after spending steep tax schedule to the US federal reserve
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