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Paulson Considers A Conservatorship For AIG

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Officials at the Treasury Department are considering a government takeover of AIG, possibly placing the company into a 'conservatorship' as occurred with Fannie Mae and Freddie Mac, according to a person familiar with the thinking at the Treasury. There may be considerable legal obstacles to such a takeover, as it is not clear even to Treasury officials what the authority for such a takeover might be.
It is far from certain that this plan will come to fruition, according to the source. The questionable legal authority for the move may make a Fed loan more likely. The discussions at the Federal Reserve and the Treasury are ongoing. In fact, it seems as if many of those involved with the discussions are floating rumors about the discussions, perhaps hoping the market reaction could influence the outcome.