2008-09-16 — nytimes.com
In an extraordinary turn, the Federal Reserve was close to a deal Tuesday night to take a nearly 80 percent stake in the troubled giant insurance company, the American International Group, in exchange for an $85 billion loan, according to people briefed on the negotiations.
All of A.I.G.’s assets would be pledged to secure the loan, these people said, and in return, the Fed would receive warrants that could be exchanged for an ownership stake. Stock of existing shareholders would be diluted, but not wiped out.
Edward Harrison says (in combination with not lowering rates): this is exactly what a central bank should do. Weigh in on his blog.
Update: Mish isn't particularly happy.
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