The Federal Reserve Board said yesterday it has authorized a transaction that will provide American International Group with an additional $37.8 billion in credit on top of the $85 billion already extended.

Explaining the arrangement, the Fed said the Federal Reserve Bank of New York has been authorized to borrow up to $37.8 billion in investment-grade, fixed-income securities from AIG in return for cash collateral.

Securities involved were previously lent by AIG's U.S. insurance company subsidiaries to third parties, such as banks and investors.

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