UPDATE 1-AIG stake has potential for big returns - NY Fed
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NEW YORK, Sept 29 (Reuters) - The Federal Reserve Bank of New York said on Monday that a 79.9 percent equity interest in American International Group Inc (AIG.N) has the potential "to provide a substantial financial return to the American people."
The return could be realized if an $85 billion loan by the New York Fed "provide AIG with the intended breathing room to execute a value-maximizing strategic plan," the New York Fed said in a statement.
The New York Fed also said it understands "the importance of keeping AIG's regulated subsidiaries -- which include its insurance companies -- well capitalized, and will continue to work with their regulators."
"Policyholders across the entire AIG family should take comfort from the fact that AIG's regulated subsidiaries may be supported by, but are not obligated under, the Federal Reserve's loan facility," the New York Fed said.
AIG, once the world's largest insurer, was forced to seek a government rescue earlier this month after its shares crashed, leading ratings agencies to cut its credit ratings and forcing the company to post billions of dollars in additional collateral on derivatives contracts it insured.
AIG signed a "definitive" agreement to borrow up to $85 billion from the U.S. Federal Reserve, paving the way for the government to take a 79.9 percent stake in the insurer. (Reporting by Chris Reese; Editing by Diane Craft)
