The Federal Reserve on Wednesday agreed to provide insurance giant American International Group Inc. with a loan of up to $37.8 billion, on top of one made to the troubled company last month.
Under the new program, the Federal Reserve Bank of New York will borrow up to $37.8 billion in investment-grade, fixed-income securities from AIG in return for cash collateral. These securities were previously lent by AIG’s insurance company subsidiaries to third parties.
The arrangement will help AIG secure funds on an as-needed basis, the New York-based insurer said in a statement.
As of Monday, about $37.2 billion of securities were available for loans under AIG’s securities lending program.
On the brink of failure last month, AIG was bailed out when the government offered it an $85 billion loan during the ongoing credit crisis that saw Lehman Brothers Holdings Inc. file for bankruptcy protection and the sale of Merrill Lynch & Co. to Bank of America Corp. In return for the two-year loan, the government received warrants to purchase up to 79.9 percent of AIG.
Talks continue on Wachovia buyout
Federal officials continued their fervent quest Wednesday to reach an agreement between Citigroup and Wells Fargo over the fate of Wachovia Corp. – which could include the splitting up of the bank.
Discussions among the Federal Reserve, Citigroup and Wells Fargo continue, said a person familiar with the situation, adding that all options are being reviewed. The person spoke on condition of anonymity because of the sensitive nature of the talks.
According to a court transcript of a teleconference between Wachovia and Citigroup lawyers and U.S. District Judge Lewis Kaplan held Wednesday, the negotiations center on “a possible grand solution.” That could involve splitting Wachovia between Wells Fargo and Citigroup.
After the battle for the Charlotte, N.C.-based bank moved to both state and federal court over the weekend, the parties agreed Monday to a cease-fire of all litigation at the urging of Federal Reserve officials. But that agreement expired at noon Wednesday without a resolution on the fate of Wachovia. Citigroup and Wells Fargo agreed Wednesday to extend the standstill until 8 a.m. EST Friday.
Sheriff halting ‘unjust’ evictions
The sheriff here said Wednesday that he’s ordering his deputies to stop evicting people from foreclosed properties because many people his office has helped throw out on the street are renters who did nothing wrong.
“We will no longer be a party to something that’s so unjust,” a visibly angry Cook County Sheriff Tom Dart said at a news conference.
“We have to be sure that when we are doing this – and we are destroying some people’s lives – we better be darned sure we’re talking about the right people,” Dart said.
Dart said that from now on, banks will have to present his office with a court affidavit that proves the home’s occupant is either the owner or has been properly notified of the foreclosure proceedings.
Illinois law requires that renters be notified that their residence is in foreclosure and they will be evicted in 120 days, but Dart indicated that the law has been routinely ignored.
He talked about tenants who dutifully pay their rent, then leave one morning for work only to have authorities evict them and put their belongings on the curb while they are gone.
In many cases, he said, tenants aren’t even aware that their homes have fallen into foreclosure.
Dart said it’s only fair for banks to give occupants of a foreclosed property adequate notice before forcing them out.
“You are talking about a lot of people in rental situations living paycheck to paycheck,” he said. “To think they are sitting on a pool of money for an up-front deposit, security deposit, is foolishness.”