As Bankruptcy Looms, AIG Tells Feds: We Need More Cash

WASHINGTON--American International Group is in talks with federal regulators about getting an additional cash infusion in order to stave off a bankruptcy filing, its officials indicated this afternoon.

"We continue to work with the Federal Reserve Bank of New York to evaluate potential new alternatives for addressing AIG's financial challenges," said AIG spokesman Peter Tulupman.

Confirming a report on CNBC this afternoon, Mr. Tulupman said that AIG has not yet reported fourth quarter and year-end 2008 results.

He added that, "We will provide a complete update when we report financial results in the near future."

According to CNBC, AIG's board is scheduled to meet this Sunday night in hopes of hammering out an agreement with the government. But in case it can't, AIG's lawyers at Weill Gotschal are preparing for the possibility of bankruptcy, the article said.

The need for new funds stems from the fact it is likely to report a loss of up to $60 billion stemming from writedowns on a variety of assets, including commercial real estate.

Without additional capital, such a loss would likely trigger further downgrades in its insurance and credit ratings, forcing AIG to put up additional collateral it doesn't have, according to CNBC.

Treasury Department did not respond to requests for comment, and a spokesman for the Board of Governors of the Federal Reserve Board in Washington, D.C., said it would look into the issue.

A spokesman for Rep. Barney Frank, D-Mass., chairman of the House Financial Services Committee, said in response to the reports that, "The Federal Reserve handled all interventions with AIG. The Federal Reserve will recommend when, and if, Congress needs to be involved."

The Treasury and the Federal Reserve have already provided over $150 billion in assistance to AIG since a Sept. 17 agreement in which AIG ceded a 79.9 percent share of its stock in return for federal aid.

David Neustadt, a spokesman for the New York Insurance Department said his agency would not comment on press reports. He said that as far as he knew, the department had not been informed of a possible $60 billion loss and even if it had, "it would be inappropriate to comment" before any official announcement.

The CNBC story said the talks between the government and AIG are focused on how the company can swap some of the debt held by the government for equity in AIG. The government already holds a 79.9 percent interest.