By Bill Van Auken
17 September 2008
Following emergency consultations between the Federal Reserve, the US Treasury and the Democratic leaders of both houses of Congress, the Federal Reserve on Tuesday night announced a bailout of the Wall Street insurance giant American International Group AIG.
According to reports posted by the New York Times and the Wall Street Journal, under the emergency plan the Fed will provide the failing firm with an $85 billion loan in exchange for 80 percent of its assets.
The reported bailout is a reversal of the policy adopted by the federal government just last weekend, when it failed to intervene to stop the collapse of Lehman Brothers, the country’s fourth largest investment bank. According to the Journal, government officials believed “it would be ‘catastrophic’ to allow AIG to fail.”