American International Group had warned of turmoil around the globe if the government allowed the insurer to fail when it appealed to U.S. regulators for its latest rescue, Bloomberg said citing an AIG presentation dated February 26.AIG needed immediate help from the Federal Reserve and Treasury to prevent a "catastrophic" collapse that would be worse for markets than the demise of Lehman Brothers Holdings , according to the 21-page draft AIG presentation circulated among federal and state regulators, the agency reported.
"What happens to AIG has the potential to trigger a cascading set of further failures which cannot be stopped except by extraordinary means," the agency quoted the presentation.
AIG warned its failure could cripple money-market funds, force European banks to raise capital, cause competing life insurers to fail and wipe out the taxpayers' stake in the firm, the agency said.
The presentation said without more U.S. help, investment losses would mean "AIG will not be able to repay its obligations" and that cash previously provided by the U.S., which controls a 79.9 percent stake in the insurer, could be lost, it added.
AIG could not be immediately reached by Reuters for comment.
The Federal Reserve first rescued AIG in September with an $85 billion (60.5 billion pounds) credit line after losses from toxic investments and collateral demands from banks left AIG facing bankruptcy.
Late last year, the rescue packaged was increased to $150 billion. The bailout was overhauled again last week to offer the insurer an additional $30 billion in equity.
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