March 2, 2009: AIG Bailout Again Made More Favorable to Company

On the same day AIG announces the biggest loss ever in corporate history (see October-November 2008), the bailout of the troubled insurer is again increased and its terms eased. First, the US Treasury and Federal Reserve announce a plan to spend up to $30 billion more on preferred shares. However, the Treasury says the dividend on preferred stock, previously 10 percent, might fall. In addition, the bailout’s terms and conditions are altered to give the insurer a billion-dollar-a-year break on interest and dividend payments. [Bloomberg, 3/5/2009; Reuters, 4/17/2009] The size of the bailout, initially $85 billion, has now more than doubled, and the terms have been eased repeatedly (see September 16, 2008, October 8, 2008, and November 10, 2008).