AIG warned U.S. government of "catastrophic" consequences should it not receive more money
AIG spelt out a dire warning to U.S. regulators when asking for its latest bailout funds, according to a report on Bloomberg.
AIG warned that there would be turmoil around the globe if the U.S. government allowed it to fail. The 21-page draft AIG presentation cited by Bloomberg is dated February 26 and was circulated among U.S. federal and state regulators.
AIG said in the presentation that it needed immediate help to prevent a "catastrophic" collapse that would be worse for markets than the demise of Lehman Brothers.
"What happens to AIG has the potential to trigger a cascading set of further failures which cannot be stopped except by extraordinary means," the presentation said, according to Bloomberg.
In the presentation AIG warned its failure could cripple money-market funds, force European banks to raise capital, cause competing life insurers to fail and wipe out the taxpayers' stake in the firm. Without more U.S. help, investment losses would mean "AIG will not be able to repay its obligations" and that cash previously provided by the U.S., which controls a 79.9 percent stake in the insurer, could be lost.
The Federal Reserve first bailed out AIG in September last year with an $85bn credit facility, after collateral demands from banks left AIG facing bankruptcy. Late last year, the bailout package was increased to $150bn. Last week a further $30bn in equity was offered.