Sunday, November 09, 2008

Double Down


The Bush administration was overhauling its rescue of the American International Group on Sunday night, according to people involved in the transaction, amid signs that the interest on its initial credit line of more than $100 billion was putting too much strain on the ailing insurance giant.

The Treasury Department and the Federal Reserve were near a deal to invest another $40 billion into the company, these people said, as part of a huge restructuring of A.I.G.’s debt. The government made an $85 billion emergency line of credit available in September to keep it from toppling and added $38 billion in early October when it became clear that the original amount was not enough.

The restructuring of the deal, which may be announced as early as Monday morning, is just one sign of the intense debate in Washington over how and when the government should be bailing out private companies. The money would come from the $700 billion that Congress authorized the Treasury to use to shore up financial companies. Just this weekend, Democratic leaders in Congress called on the Bush administration to use some of that money to rescue Detroit automakers.

When the restructured deal is complete, taxpayers will have invested and lent a total of $150 billion to A.I.G., the most the government has ever directed to a single private enterprise. It is a stark reversal of the government’s assurance that its previous moves had stemmed the bleeding at A.I.G.