AIG bailout 'had poisonous effect on US financial system'

11 June 2010

The government package of financial support for American International Group (AIG) set a precedent that showed Wall Street firms they would be bailed out no matter what the cost to the taxpayer, a committee has claimed.

This is the view of a new report from the Congressional Oversight Panel, which stated that the rescue of AIG continues to have "a poisonous effect on the marketplace".

"[It] demonstrated that Treasury and the Federal Reserve would commit taxpayers to pay any price and bear any burden to prevent the collapse of America's largest financial institutions," the paper said.

AIG has received more than $182 billion worth of funding from the government so far and still owes the Treasury around $49 billion.

Earlier this week, the panel suggested AIG may still be able to raise around $35.5 billion from its AIA unit, despite the collapse of a proposed takeover by Prudential.

It was said an initial public offering is under consideration, reported Bloomberg.

By Gary Cooper

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