Interesting day on Wall Street yesterday

The authorities, which will retain veto power over major decisions at the company, will receive equity giving them a 79.9% stake in AIG. In return, the insurer would receive a bridge loan of $85B to keep it afloat until it could dispose of billions of dollars in assets. The Fed said the loan was expected to be repaid by the proceeds of selling AIG operating companies. A senior Fed staffer said the most likely outcome was an orderly liquidation of AIG, though it was possible that the firm could survive as an ongoing business. The loan is at a punitive interest rate of three-month Libor plus 850 basis points, giving AIG a strong incentive to repay it as soon as possible. It will be secured on all AIG’s assets, including those of its subsidiary companies.

The CEO was out on his fanny. That at least is a positive first step.

Barclays will buy Lehman’s high-profile New York headquarters at the north end of Times Square, along with two data centers in nearby New Jersey, for a price it said was close to their current estimated market value of $1.5B. Barclays will buy Lehman’s operations, along with trading assets valued at $72B and trading liabilities worth $68B, for $250m in cash.

On paper that's 6.25 cents on the dollar, although I understand that the assets and liabilities have not been marked to market, so it's probably not quite as good a deal as that.

In other news...

Federal Reserve policymakers held the target lending rate at 2% on Tuesday. Analysts said it demonstrates that the Fed is being conscientious not to use basic monetary policy to address specific problems in the financial industry.