Treasury restructures AIG bailout

WASHINGTON, Nov. 10 (UPI) -- The U.S. Treasury said Monday it would purchase stock in the nation's largest insurance company as part of a plan to restructure its federal aid.

The Treasury is restructuring the previous plan in which the Federal Reserve allowed American International Group $123 billion in credit. Instead, the Treasury will fold the company into the $700 billion Emergency Economic Stabilization Act.

The new terms -- in a package worth $150 billion -- should ease the company's financial obligations to the government, The Wall Street Journal said Monday.

AIG would secure $40 billion with the Treasury's purchase of senior preferred stock, which the company will then use to pay down its dept to the Federal Reserve, the Treasury said.

Besides the $40 billion equity deal, the package includes a $60 billion loan and $50 billion in capital to purchase some of AIG's toxic assets.

Implied in the new agreement, the Journal reported, is acknowledgment that the credit lines of $85 billion and $37.8 billion failed to put the company to rights. AIG, in spite of the credit program, reported a third-quarter net loss of $24.47 billion as it continued to suffer investment losses and asset downgrades.