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AIG failure would still be disastrous for global markets

A revised bailout of American International Group Inc may be just another “band-aid” solution, but more than five months after it was first rescued by the government the option of letting the insurer fail would still be considered too big a shock to already fragile global markets.

AIG’s board on Sunday approved a broad revision of the U.S. government’s $150 billion rescue. It was the third time the government has reached out to the struggling insurer and the latest rescue is expected to put greater funds at AIG’s disposal to keep it afloat as it readies to report a roughly $60 billion loss early on Monday.

While putting more taxpayer money at risk is unlikely to be palatable in the current economic environment, analysts said the U.S. government had little choice. Without government intervention, AIG’s expected losses would prompt credit ratings downgrades — triggering even more debilitating losses for the insurer, and its trading partners.

[ Continue reading original article on Reuters ]

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