The Federal Reserve is working to encourage JP Morgan and/or Goldman Sachs to float $75 billion to troubled insurer American International Group (AIG). Earlier this evening, bond rating firms downgraded AIG, forcing the company to come up with the money to stay solvent.
AIG won the right to borrow $20 billion from its subsidiaries earlier today, but that did little to solve the larger problem. AIG’s stock tumbled 60 percent today.
The consequences of a failure at AIG are hard to measure. AIG is a counter-party to so many derivatives contracts around the world; its failure would ripple through the financial system.
Keep tuned in. Tomorrow may be more important than today in assessing the status of the financial crisis.