AIG 'in trouble' as Wall Street woes build

15 September 2008

Insurance giant AIG is rumored to be seeking a government bailout, following an erosion in share value.

The firm's stock has dropped 45 per cent over the past week's trading, and is likely to suffer further when the markets open today.

Lehman Brothers declared bankruptcy yesterday and Merrill Lynch said that it is to merge with Bank of America.

Both firms have suffered similar credit crunch-related losses.

Therefore, market sentiment on financial firms is likely to be very negative over days to come, putting AIG under further strain.

The firm has already asked the Federal Reserve for a $40 billion bridge loan, in order to shore up its balance sheet, according to reports.

This move would come ahead of an anticipated downgrade of AIG from ratings agencies - which would necessitate extra capital to be held by the firm.

Nicholas Ashooh, spokesman for the insurer, commented: "A lot of meetings [are] going on. We're looking at a lot of options.

"We're talking with a lot of parties."

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