New York — New York Governor David Paterson says American International Group will be allowed to access capital held in its subsidiaries in order to help the company with issues of liquidity and fund its day-to-day operating needs.

“They can make a bridge loan to themselves,” Paterson said, speaking at a press conference. Paterson said granting AIG, the largest U.S. insurer by assets, special access to the money did not constitute a government bailout.

Paterson’s announcement comes as AIG’s share price plunged in early trading upon news that the company was seeking a $40 billion bridge loan from the Federal Reserve in an attempt to stave off a credit-rating downgrade. Over the weekend, AIG was reported to have rebuffed an $8 billion offer from buyout specialist J.C. Flowers & Co. AIG also is said to be in talks with Kohlberg Kravis Roberts, TPG and Berkshire Hathaway.

Paterson said $20 billion should buy AIG time while it looks to shed assets and considers reorganization. Among the business units the company is said to be shopping are American General Finance, AIG Investments and the company’s stake in reinsurer Transatlantic Holdings Inc.

Larry Roth, CEO of AIG Advisor Group told Financial Planning, a SourceMedia publication, today he has not heard anything to indicate that his group may be on the block. “‘Steady as she goes’ is the phrase of the day,” Roth said. “Advisors we work with understand that we’re a healthy enterprise.”

Sources: American Banker, Bloomberg, Financial Planning

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