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The Federal Reserve Board has authorized the Federal Reserve Bank of New York to borrow securities from certain regulated domestic life insurance subsidiaries of the American International Group (ÌìÃÀÍøÕ¾´«Ã½´«Ã½).

Under this program, the New York Fed will borrow up to $37.8 billion in investment-grade, fixed-income securities from ÌìÃÀÍøÕ¾´«Ã½´«Ã½ in return for cash collateral. These securities were previously lent by ÌìÃÀÍøÕ¾´«Ã½´«Ã½’s insurance company subsidiaries to third parties.

ÌìÃÀÍøÕ¾´«Ã½´«Ã½ shares fell 17 percent to $2.64 in early trading Thursday on the New York Stock Exchange following the news of the latest government assistance, which came only a week after the government loaned it $85 billion.

As expected, drawdowns to date under the existing $85 billion New York Fed loan facility have been used, in part, to settle transactions with counterparties returning these third-party securities to ÌìÃÀÍøÕ¾´«Ã½´«Ã½.

This new program will allow ÌìÃÀÍøÕ¾´«Ã½´«Ã½ to replenish liquidity used in settling those transactions, while providing enhanced credit protection to the New York Fed and U.S. taxpayers in the form of a security interest in these securities, according to officials.

ÌìÃÀÍøÕ¾´«Ã½´«Ã½ is now in debt to the government for almost $125 billion. ÌìÃÀÍøÕ¾´«Ã½´«Ã½ has begun the process of selling assets to repay the loans but no deals have yet been finalized.

Topics New York ÌìÃÀÍøÕ¾´«Ã½´«Ã½