The federal government is boosting its investment in embattled insurer American International Group, providing the company with an additional $30 billion in capital on an as needed basis, but also exposing U.S. taxpayers to additional risk, reports the Wall Street Journal.
The new terms ease the financial burden on the company, which today reported a $61.66 billion loss for the fourth quarter.
The Treasury Department and Federal Reserve announced the overhaul of the government’s bailout of the firm in a joint statement early this morning. In addition to providing up to $30 billion in additional capital to AIG in return for preferred stock, the Treasury said it would convert its existing $40 billion of preferred shares into new preferred shares that more closely resemble common stock. Under the new terms, the Treasury is to get a 77.9 percent equity interest via preferred stock on Wednesday.
“The company continues to face significant challenges, driven by the rapid deterioration in certain financial markets….The additional resources will help stabilize the company, and in doing so help to stabilize the financial system,” the Treasury and Federal Reserve said in a statement.