Fed Considering Reducing AIG's Credit Line by $3.6 Billion

The Federal Reserve is planning to reduce its credit line to American International Group (AIG) by about $3.6 billion, indicating growing confidence that the insurer can decrease its reliance on the public sector.

The terms of AIG's 2008 rescue indicated that when the company paid down the credit line, it would reduce the amount of credit available, Bloomberg News reported without naming its sources. Last year, the Fed made an exemption on $3.6 billion of money from asset sales. Now it has decided that the relief may not be necessary any more.

AIG had $13.3 billion in credit on the line as of June 30. The company's CEO Robert Benmosche said earlier this month that he expects to make "meaningful progress" in paying down the credit line this year.

"This means there's little anticipation AIG will need the credit," said Clark Troy, an analyst with research firm Aite Group, told Bloomberg News. "It's a step in the right direction in terms of making AIG less dependent on federal aid."

Also See: AIG to Repay $4 Billion in Federal Loans