The US Treasury has nearly doubled its rescue package for the massive insurance firm American International Group. It said that was to prevent the collapse of what it called a “systemically important company.” At the same time, mortgage-finance giant Fannie Mae said it might have to shut down if it does not get more government cash.
As the rescue package boost was announced AIG reported a third quarter loss of 19.1 billion euros. In the same period, Fannie Mae lost 22.5 billion euros as it wrote down assets. In return for up to 117 billion euros, the US government will get partial ownership of AIG, but it will also be exposed to billions in additional potential losses.
As well as massive losses on investments, AIG has had to pay out billions in insurance claims from this year’s hurricanes along the US Gulf Coast.
Fannie Mae – which is the largest provider of funding for home mortgages in the US – is
warned that the worst housing crisis since the Great Depression could wipe out its net worth by the end of the year.