AIG shares drop ahead of congressional hearing

By STEPHEN BERNARD

posted: 14 DAYS 14 HOURS AGO

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NEW YORK -Shares of American International Group Inc. slid Tuesday, a day ahead of a Congressional hearing on bailout money that was given to the troubled insurer.

Treasury Secretary Timothy Geithner is scheduled to testify Wednesday before a House committee about funds intended for AIG that were then routed to other banks.

In 2008, the Federal Reserve Board, through Geithner as head of the Federal Reserve Bank of New York, pledged $85 billion to prop up the ailing insurer.

That was one month after AIG, based in New York, had revealed billions in losses from credit default swaps.

AIG received billions more in taxpayer funded rescue money.

Some of that bailout money was paid out by AIG to other banks to cancel complex financial contracts. The hearing Wednesday is meant to determine why the New York Fed did not layout ground rules before issuing the rescue funds, measures that some critics say would have saved taxpayer money.

Also on Tuesday, the Financial Times reported that AIG would hold onto one of its strongest divisions, International Lease Finance Corp., which leases aircraft.

AIG declined to comment.

The decision to hold onto ILFC would fit with CEO Robert Benmosche's goal of slowing down the sale of assets to repay the government.

AIG shares fell 89 cents, or 3.4 percent, to $25.20 in midday trading. Shares have traded between $6.60 and $55.90 during the past year.

2010-01-26 12:15:05