Market instability

The recent market instability was caused by many factors, chief among them a dramatic change in the ability to create new lines of credit, which dried up the flow of money and slowed new economic growth and the buying and selling of assets. This hurt individuals, businesses, and financial institutions hard, and many financial institutions were left holding mortgage backed assets that had dropped precipitously in value and weren’t bringing in the amount of money needed to pay for the loans. This dried up their reserve cash and restricted their credit and ability to make new loans.

World Bank

Developing countries resultantly has to face a new challenge from the global financial crisis, which is rapidly becoming an unemployment crisis. The World Bank Group is helping with the financial rescue but believes that we must remain focused on the human rescue for the many millions left behind. As many as 53 million more people could be trapped in poverty as economic growth slows around the world, according to Bank forecasts. This is on top of the 130-155 million people pushed into poverty in 2008 because of soaring food and fuel prices.Sharply tighter credit conditions and weaker growth are cutting into government revenues and their ability to invest to meet education, health and gender goals, as well as the infrastructure expenditures needed to sustain growth. Almost 40 percent of 107 developing countries were highly exposed to the poverty effects of the crisis and the remainder was moderately exposed, with less than 10 percent facing little risk, according to new World Bank Group estimates.

AIG revised plan

American International Group, Inc. (AIG) today announced agreements with the U.S. Treasury and the Federal Reserve to establish a durable capital structure for AIG, and facilities designed to resolve the liquidity issues AIG has experienced in its credit default swap portfolio and its U.S. securities lending program. The $85 billion emergency bridge loan was essential to prevent an AIG bankruptcy, which would have caused incalculable damage to AIG, our economy and the global financial system. Thanks to decisive action by Congress, Treasury and the Federal Reserve, there are now additional tools available to create a durable capital structure that will make possible an orderly disposition of certain of AIG's assets and a successful future for the company.
The actions announced include both ongoing financing facilities and one-time transactions designed to address AIG's liquidity issues. The ongoing financing facilities include:

• Preferred Equity Investment
• Revised Credit Facility
• Resolution of U.S. Securities Lending Program

AIG bail out plan doubles

The AIG bailout plan just got bigger. The US government has scrapped the original $85 billion bailout plan for American International Group and signed a new $150 billion deal that it hopes will be more likely to save the from going belly up.Under the terms of the new AIG bailout plan, the company will get lower interest rates and $40 billion of new capital from the government to help ease the impact of four straight quarterly deficits, including a $24.5 billion third-quarter loss.Days before the new taxpayer-funded AIG bailout plan, the company treated a small group of independent financial planners to a resort stay at the lavish Pointe Hilton Squaw Peak resort in Phoenix. AIG reportedly spent $343,000 for the resort vacation. This is the second time since September that AIG was involved in a six-figure event at a resort.

AIG bail out plan doubles

The AIG bailout plan just got bigger. The US government has scrapped the original $85 billion bailout plan for American International Group and signed a new $150 billion deal that it hopes will be more likely to save the from going belly up.Under the terms of the new AIG bailout plan, the company will get lower interest rates and $40 billion of new capital from the government to help ease the impact of four straight quarterly deficits, including a $24.5 billion third-quarter loss.Days before the new taxpayer-funded AIG bailout plan, the company treated a small group of independent financial planners to a resort stay at the lavish Pointe Hilton Squaw Peak resort in Phoenix. AIG reportedly spent $343,000 for the resort vacation. This is the second time since September that AIG was involved in a six-figure event at a resort.

AIG bail out plan

In a bid to save financial markets and the economy from further turmoil, the U.S. government agreed Tuesday to provide an $85 billion US emergency loan to rescue the huge insurer AIG.
The Federal Reserve said in a statement it determined that a disorderly failure of American International Group could hurt the already delicate financial markets and the economy.
It also could "lead to substantially higher borrowing costs, reduced household wealth and materially weaker economic performance," the Fed said. The Fed said in return for the loan, the government will receive a 79.9 per cent equity stake in AIG. The problems at AIG stemmed from its insurance of mortgage-backed securities and other risky debt against default. If AIG couldn't make good on its promise to pay back soured debt, investors feared the consequences would pose a greater threat to the U.S. financial system than this week's collapse of the investment bank Lehman Brothers.

AIG bankruptcy

AIG known as American International Group had been on the brink of bankruptcy as a private market solution to the nation's largest insurer's problem failed to materialize. Shares of AIG slumped 30% to $2.60. AIG suffered a liquidity crisis following the downgrade of its credit rating. The AIG Financial Products had entered into credit default swaps to insure $441 billion worth of securities originally rated AAA.On September 14, 2008, AIG announced it was considering selling its aircraft leasing division, in an effort to raise necessary capital for the company. But on September 16, AIG's stock dropped 60 percent at the market's opening.