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Paulson offered the assessment in response to a direct question about whether the Federal Reserve would be providing a "bridge loan" to AIG (NYSE: AIG | Quote | Chart | News | PowerRating) as it looks to sell assets or otherwise raise tens of billions of dollars in new capital.
"What is going on right now in New York has got nothing to do with any bridge loan from the government," Paulson said as AIG officials were set to meet with Federal Reserve Bank of New York President Timothy Geithner in an 11:30 a.m. meeting. "What's going on in New York is a private sector effort, again, focused on dealing with an important issue that I think it's important that the financial system work on right now."
Earlier in the day, New York Gov. David Paterson confirmed in a briefing that Insurance Superintendent Eric Dinallo would look to intercede on the company's behalf "about the Fed being involved in an arrangement where AIG would have resources to tide them over." Paterson announced a plan that would allow AIG's holding company access to up to $20 billion in capital from its insurance subsidiaries.
Paulson said he could not comment further on any potential deal with AIG, and he left the door open to future interventions in the market similar to those taken with respect to investment bank Bear Stearns and mortgage agencies Fannie Mae and Freddie Mac, should circumstances warrant.
"Nothing is more important right now than the stability of our capital markets, so it's important that regulators remain very vigilant, but I don't take lightly ever putting the taxpayers on the line to support an institution," Paulson said.
Attempts to reach AIG or Fed officials for comment were not immediately successful.
In afternoon trading on Sept. 15, shares of AIG were trading at $5.15, down 57.6% from the prior close.
(By R.J. Lehmann, Washington bureau manager: raymond.lehmann@ambest.com)
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