AIG execs can relax: Fed adds $37.8B to credit line

CHARLOTTE, N.C. - The Federal Reserve yesterday agreed to provide insurance-giant American International Group Inc. with a loan of up to $37.8 billion, on top of one made to the troubled company last month.

The news came as the White House yesterday said it was "despicable" that AIG executives spent hundreds of thousands of dollars on a posh West Coast retreat just days after getting an $85 billion federal bailout.

Under the new program, the Federal Reserve Bank of New York will borrow up to $37.8 billion in investment-grade, fixed-income securities from AIG in return for cash collateral. These securities were previously lent by AIG's insurance company subsidiaries to third parties.

The arrangement will help AIG secure funds on an as-needed basis, the New York-based insurer said in a statement.

On the brink of failure last month, AIG was bailed out when the government offered it an $85 billion loan during the ongoing credit crisis. In return for the two-year loan, the government received warrants to purchase up to 79.9 percent of AIG.

As of Sept. 30, AIG had drawn $61 billion on the credit facility, of which about $54 billion has gone toward its securities-lending and AIG's financial-products area. The rest of the money has been for other liquidity needs amid an "unprecedented" freezing of credit markets, Chief Executive Edward Liddy said last week.

Some money from somewhere apparently went to a fancy California retreat.

Lawmakers investigating the AIG meltdown said the retreat hadn't included anyone from the financial-products division that nearly drove the company under, but they were still enraged that executives of AIG's main U.S. life insurance subsidiary spent $440,000 on the retreat, complete with spa treatments, banquets and golf outings.

"It's pretty despicable," White House press secretary Dana Perino said.

The tab at the coastal St. Regis resort south of Los Angeles included $23,380 worth of spa treatments for AIG employees, according to invoices the resort turned over to the House Oversight and Government Reform Committee. *