In an unexpected move, the Federal Reserve Bank of New York will loan nearly $85 billion to mortgage giant American International Group, effectively rescuing them from bankruptcy.

The loan was approved by the Federal Reserve Board, and in exchange, the federal government will receive an almost 80% stake in the company, giving it complete control over its actions.

The government had first avoided lending the money to AIG, in hopes that other investment firms would put together a near $75 billion rescue fund.‚  After it became evident that private investment firms refused to lend aid, the reserve board was forced to take action, since AIG has an even larger market influence than Lehman Brothers.

The federal reserve did not aid Lehman Brothers; they recently filed for the largest bankruptcy in American history.

AIG is the nation’s largest insurer.‚  If it filed bankruptcy, the move would majorly effect world markets, since the company has over $1.1 trillion in assets, according to CNNMoney.

AIG will sell some of its businesses, and replace its executive staff, the federal government has control over these decisions, and as of yet, no announcements have been made.

All taxpayers will be protected.

About The Author

Sachin Seth is the Blast Magazine world news reporter. He writes the Terra blog. You can visit his website at or follow him on twitter @sachinseth

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