Document Type

Case Study

JEL Codes

G01, G28


On September 15, 2008, the big three rating agencies downgraded AIG’s credit ratings multiple levels, exacerbating liquidity strains that the company was experiencing due to increasing cash demands by securities borrowers and collateral calls by credit default swap (CDS) customers. To prevent AIG from filing for bankruptcy, the Federal Reserve (the Fed) announced on the following day that, pursuant to its emergency powers, it would provide the company with an $85 billion Revolving Credit Facility (RCF). The RCF was secured by AIG assets and interests in its subsidiaries and required AIG to grant the US Department of the Treasury a 79.9% voting equity interest in the company. Although AIG leaned heavily upon the RCF, the credit line was insufficient to stabilize AIG. The government later provided additional assistance and eased the terms of the RCF. In January 2011, AIG paid the last of the amounts owed to the Federal Reserve Bank of New York (FRBNY) under the RCF, ending it. The FRBNY netted $6.4 billion in capitalized interest and fees from the program.

Date Revised