The Fed backstopped AIG’s credit default swap portfolio and its securities lending business. In exchange it would take stock in AIG and its subsidiaries that would give the US government a 79.9 percent equity stake in AIG’s global insurance business. Following the template established with the Fannie Mae and Freddie Mac nationalization, the deal inflicted a huge loss on AIG’s existing shareholders. The securities lending business was unwound, with the New York Fed purchasing from AIG its depreciated portfolio of MBS, enabling it to pay off its securities-lending counterparties.
