Chicago — The greater press is reporting that American International Group Inc. (AIG) says it purchased an additional $16 billion in collateralized debt obligations (CDO) insured through credit-default swap contracts in an effort to reduce its exposure to insurance guarantees written against the instruments.
The collateralized debt obligations—bonds backed by various slices of debt such as mortgage-backed securities—allow AIG to cancel an equivalent amount of swaps contracts that its finance subsidiary had written on those securities, relieving some of the financial pressure that had led the government to step in to help the company in September.
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