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CRISIS AND PANIC 

cally restrained from threatening an AIG bankruptcy because it had no actual plans
to carry out such a threat” and that it was “uncomfortable interfering with the sanc-
tity of the counterparties’ contractual rights with AIG,” which were “certainly valid
concerns.” 
Geithner has said he was confident that full reimbursement was “absolutely” the
right decision. “We did it in a way that I believe was not just least cost to the taxpayer,
best deal for the taxpayer, but helped avoid much, much more damage than would
have happened without that.” 
New York Fed officials told the FCIC that threats to AIG’s survival continued after
the  billion loan on September .  “If you don’t fix the [securities] lending or
the CDOs, [AIG would] blow through the  billion. So we needed to stop the suck-
ing chest wound in this patient,” Dahlgren said. “It wasn’t just AIG—it was the finan-
cial markets. . . . It kept getting worse and worse and worse.” 
Baxter told the FCIC that Maiden Lane III stopped the “hemorrhage” from AIG
Financial Products, which was paying collateral to counterparties by drawing on the
 billion government loan. In addition, because Maiden Lane III received the
CDOs underlying the CDS, “as value comes back in those CDOs, that’s value that is
going to be first used to pay off the Fed loan; . . . the likely outcome of Maiden Lane
III is that we’re going to be paid in full,” he said. 
In total, the Fed and Treasury had made available over  billion in assistance
to AIG to prevent its failure.  As of September , , the total outstanding assis-
tance has been reduced to . billion, primarily through the sale of AIG business
units. 

CITIGROUP: “LET THE WORLD KNOW
THAT WE WILL NOT PULL A LEHMAN”

The failed bid for Wachovia reflected badly on Citigroup. Its stock fell  on Octo-
ber , , the day Wachovia announced that it preferred Wells’s offer, and another
 within a week. “Having agreed to do the deal was a recognition on our part that
we needed it,” Edward “Ned” Kelly III, vice chairman of Citigroup, told the FCIC.
“And if we needed it and didn’t get it, what did that imply for the strength of the firm
going forward?” 
Roger Cole, then head of banking supervision at the Federal Reserve Board, saw
the failed acquisition as a turning point, the moment “when Citi really came under
the microscope.” “It was regarded [by the market] as an indication of bad manage-
ment at Citi that they lost the deal, and had it taken away from them by a smarter,
more astute Wells Fargo team,” Cole told the FCIC. “And then here’s an organization
that doesn’t have the core funding [insured deposits] that we were assuming that they
would get by that deal.” 
Citigroup’s stock rose  the day after the Columbus Day announcement that it
would receive government capital, but the optimism did not last. Two days later, Citi-
group announced a . billion net loss for the third quarter, concentrated in sub-
prime and Alt-A mortgages, commercial real estate investments, and structured