The Federal Reserve has agreed to provide insurance giant American International Group with a loan of up to $37.8 billion, on top of one made to the troubled company last month.
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.
Last month, the Fed provided an $85 billion loan to the company, which was on the brink of bankruptcy.
The White House said on Wednesday it was "despicable" that AIG executives spent hundreds of thousands of dollars on a posh California retreat just days after getting the $85 billion bailout.
Lawmakers investigating the meltdown of AIG said the retreat didn't include 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, complete with spa treatments, banquets and golf outings.
"It's pretty despicable," White House press secretary Dana Perino said.
AIG sent its executives to the coastal St. Regis resort south of Los Angeles even as the company tapped into an $85 billion loan from the government that it needed to stave off bankruptcy. The resort tab 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.
"The president did not want to move forward on this rescue package to help anybody in the top positions on Wall Street," Perino said. "He was concerned about everyday people like you and me. ... He didn't do that to help top executives and certainly not to help executives go to a spa."
The hearing also revealed that AIG executives hid the full range of its risky financial products from auditors as losses mounted, according to documents released Tuesday by the panel examining the chain of events that forced the government to bail out the conglomerate.
AIG's problems did not come from its traditional insurance subsidiaries, which remain healthy, but instead from its financial services operations, primarily its insurance of mortgage-backed securities and other risky debt against default. Government officials feared a panic might occur if AIG couldn't make good on its promise to cover losses on the securities; investors feared the consequences would pose a threat to the U.S. financial system, which led to the government bailout.
AIG suffered huge losses when its credit rating was cut, thanks largely to complex financial transactions known as "credit default swaps." AIG was a major seller of the swaps, which are a form of insurance, though they are not regulated that way.
The swap contracts promise payment to investors in mortgage bonds in the event of a default. AIG has been forced to raise billions of dollars in collateral to back up those guarantees.