Two days after U.S. authorities refused to rescue investment bank Lehman Brothers Holdings and forced it into bankruptcy, they have now rode to the rescue of insurance giant American International Group (AIG).
The $85 billion rescue package is good news for Singaporeans who has insurance with AIA as it helped AIG stave off bankruptcy. The bailout calls for the U.S. Federal Reserve to lend up to $85 billion to AIG for two years in exchange for a 79.9 percent equity stake.
This plus the news that British bank Barclays Plc is going to buy over several parts of Lehman for $1.75 billion gave a measure of calm for Wall Street and the shell-shocked global markets. The measure of calm is a great thing after the fall of Lehman and the sale of Merrill. Perhaps now the shell-shocked markets can go back to normal.
Or at least as calm as it could be after the bloodbath.
(On a related note, I am wondering why in the world did Bank of America offer to pay US$29 per share for Merrill because I just saw that Merrill’s share price is only about US$17-US$18. Bank of America’s shares are dropping ever since news of the deal was announced and I can understand why. Strange, strange decision)