Yahoo – The long slog continues. The feature of the post-crisis economy has been a two-speed recovery. As a group, companies have done extremely well. Corporate profits and cash holdings are at record highs. The stock market has bounced back smartly since the lows of March 2009. But consumers haven’t done quite as well.
There are several reasons for the dichotomy. Corporations increasingly operate in the global economy, which means their fortunes aren’t tied to weak demand in the U.S. Consumers have been plagued by a weak job market and a horrific housing market. The difference in the ability of the two sectors to restructure (or shuck) debt and other financial obligations rapidly also plays a role.
When a crisis comes, companies quickly and coldly cut costs by idling factories and laying people off. Those who find their debts too overwhelming seek the protection of bankruptcy court. Once they file for Chapter 11 protection, huge companies like General Motors, or American Airlines, or Border’s, can rip up contracts, get rid of onerous leases, and ask bondholders and lenders to accept stock or reduced payments in exchange for the loans they’ve made. It’s a wholesale business. In a matter of weeks, tens or hundreds of millions of dollars in debt can be wiped out.
For consumers, it takes a lot longer to restructure debt. Families can’t fire their kids, or walk away from financial commitments so easily. For most families, the biggest fixed cost is generally housing. And while it’s possible to cut housing costs by defaulting, or refinancing, or downsizing, people still have to live somewhere. And in contrast to the system for processing corporate failure, the systems for processing foreclosure and personal bankruptcy move much more slowly. Personal debt restructuring is a retail business — done in increments of a few thousand, or tens of thousands of dollars.
But here’s the thing. Through the post-crisis period, American consumers and individuals have made — and are continuing to make — serious, sometimes heroic efforts to save, stay current on financial obligations, and pay down and restructure debt. The process of digging out is going slowly, but its happening. Or at least that’s the conclusion I drew from looking at the big report on credit released by the Federal Reserve Bank of New York yesterday. (The report is here, in PDF, and the data can be seen here by clicking on the Excel file on the right of this page.)
The headline number is a little messy, because the New York Fed only started including student loans in the data this year. Excluding students loans, total consumer debt stood at $10.791 trillion in the third quarter — the 12th straight quarter of decline. Consumer debt is off 10.5 percent from the peak of $12.06 trillion in the third quarter of 2008, and stands at its lowest level since the fourth quarter of 2006. In the most recent quarter, mortgage balances alone fell $114 billion, or 1.3 percent.
As we’ve discussed in other contexts, a big chunk of the decline in consumer credit is due to defaults and write-offs. But the Fed’s data shows that, combined with some pay down activity, the rash of foreclosures and defaults has lead to some significant changes over time. Compared to the second quarter of 2008, there were 10.2 million fewer mortgages open in the third quarter of 2011. The number of credit card accounts open fell from 492.19 million in the third quarter of 2008 to 383.27 million in the third quarter, a decline of 22 percent. “Balances on those cards were nearly 20% below their 2008Q4 high,” the New York Fed notes.
There are also signs in the data that American consumers have been doing a better job keeping up with their financial obligations. In the third quarter, the delinquency rate on all U.S. household debt rose a bit, to 10 percent from 9.8 percent on June 30. That’s bad news. But look through the numbers (on page eight of the data file) and you’ll see a slow improvement. Since bottoming in the fourth quarter of 2009 at 88.02 percent, the proportion of debt balances on which borrowers are current has been trending up — not dramatically, but up nonetheless.
In addition, other metrics testify to an American consumer that is slowly digging out. The New York Fed reported that the number of people who “had a foreclosure notation added to their credit reports” in the third quarter fell 7 percent from the second quarter. It’s hard to make too much of that, given the widespread dysfunction in the mortgage industry. But personal bankruptcy filings fell 18.8 percent from the third quarter of 2010. At 423,340 in the third quarter of 2011, it was the lowest quarterly total since the fourth quarter of 2008. Through the first three quarters, bankruptcy filings are off 17 percent from the first three quarters of 2010.
And so the slow-motion process continues. Instead of dramatic, rapid improvement in household balance sheets, we get slow, barely detectable ones. The numbers show a high level of stress, a fragile recovery, and plenty of pain to come for borrowers and lenders. But they also show that, over time, the excesses that built up in the last decade are slowly being worked out.
Daniel Gross is economics editor at Yahoo! Finance.
Follow him on Twitter @grossdm; email him at grossdaniel11@yahoo.com.

The Washington Post – Capital One Financial announced Wednesday a $2.6 billion deal for the U.S. credit card portfolio of London-based HSBC Holdings, a move that would make the McLean firm the nation’s third-largest issuer of private label, or store branded, plastic.

The deal puts Capital One at the forefront of a niche market it only entered into at the start of this year. The company made its foray into the space in January by picking up the credit card portfolio of Canadian retail conglomerate Hudson’s Bay Co. That deal was followed up in April when J.P. Morgan Chase sold Kohl’s Department Stores’s card portfolio, handing over more than 20 million accounts and the right to issue cards to Kohl’s customers.

After the HSBC sale is finalized, Capital One would issue cards for such retailers as Saks Fifth Avenue, Neiman Marcus and Best Buy.

Analysts said the store-brand credit card business is rebounding, after a precipitous decline during the downturn. Delinquencies and charge-offs have slowed in the past year, while stricter standards on traditional cards have made store cards more appealing to consumers.

Private-label cards typically carry higher interest rates and lower credit lines than general-purpose plastic. Consumers with limited credit options tend to rely on these cards, and because they are unsecured there is always the looming risk of delinquencies and defaults.

“Capital One has proven to be pretty good credit managers through this cycle, and this is a way for them to continue to leverage their card expertise and get some loan growth,” said Donald Fandetti, an analyst at Citi Investment Research.

Issuers are drawn to the high fee income of store cards. Retailers that offer private-label cards tend to have a vast distribution network of stores, allowing issuers to hedge their bets against regional distress.

“You have a captive audience and a strong marketing system because the merchant is incentivized to push your product,” Sanjay Sakjrani, an analyst with Keefe Bruyette & Woods.

What’s more, the shrinking field of private label card issuers “might provide an opportunity for existing players to not only take market share, but share more of the risk with merchants,” Sakjrani said. “Some of the terms were pretty egregious for the issuers prior to the recession.”

Still, there are challenges for Capital One. Delving deeper into the card business against the backdrop of a foundering economy could prove risky, if consumers become more cautious in their spending, said Robert Hammer, head of the credit card consulting firm R.K. Hammer.

Capital One, he added, will have to “put together an attractive feature and benefit menu for cardholders to get them to use that card even more” and runs the risk of “cardholder defection.”

Hammer said the company should be able to manage those issues.

Capital One has been undergoing a larger tranformation than just getting into the private-label credit card business. The nation’s fourth-largest credit card issuer is in the process of turning itself into a mainstream consumer bank and announced a $9 billion deal to buy online bank ING Direct in June.

Capital One’s HSBC deal is slated to close in the second quarter of next year. The lender may raise up to $1.25 billion in equity to help finance the deal and has the option of paying HSBC $750 million in stock, at $39.23 per share.

Capital One anticipates that integration will cost $420 million, but expects to reduce the portfolio’s operating expenses by $350 million. The firm is projecting roughly 25 percent return on its investment in the new portfolio in 2013.

NEW YORK (AP) — American Express Co. on Monday said its fourth-quarter profit rose 49 percent, as its customers spent more and got better about paying their bills.

The card issuer said net income after paying preferred dividends jumped to $1.05 billion, or 88 cents per share, compared with $707 million, or 60 cents per share, in the 2009 fourth quarter.

The most recent results include $113 million in charges announced last week, related to the elimination of about 500 jobs in its customer service operations. Excluding the charges, profit for the quarter came to 94 cents per share.

Revenue rose 13 percent to $7.32 billion, from $6.49 billion in the prior year.

Wall Street analysts were expecting profit of 95 cents per share, on $7.28 billion in revenue, according to Fact Set.

CEO Kenneth Chenault said consumers, small businesses and corporate customers all increased their spending in the quarter. Customer spending rose 15 percent to $197.7 billion, from $172.6 billion last year. The number of cards in force held steady in the U.S. at 48.9 million, while international cards rose 8 percent to 42.1 million, from 39 million a year earlier.

The company also set aside less money to cover unpaid bills, as its customers got better at making payments on time.

Net write-offs for the quarter fell 40 percent to $117 million, from $194 million a year earlier. American Express said the percentage of U.S. payments past due by 30 days or more fell to 1.5 percent, from 1.8 percent in the 2009 fourth quarter. The percent past due by 90 days dropped to 0.9 percent, from 1.6 percent a year ago.

American Express said its expenses for the quarter rose 17 percent, to $5.61 billion, from $4.78 billion the prior year. The increase reflected higher spending on card member rewards and services, along with a 31 percent jump in salaries and employee benefits, and a 27 percent leap in spending on professional services.

The increase caught the eye of Keefe, Bruyette and Woods analyst Sanjay Sakhrani, who said he expected the matter to be raised during the company’s conference call to discuss results later Monday.

Overall, however, Sakhrani said it was a good quarter, with stronger revenue than expected and lower losses on unpaid balances.

In afterhours trading, American Express shares fell 63 cents to $45.35, after slipping 21 cents to end the regular session at $45.79.

NEW YORK (AP) — Credit card default rates mostly fell in September, but improvements in late payments slowed for most of the major card issuers.

American Express, Discover, Chase, Bank of America and Citibank all submitted regulatory filings Friday that said September charge-offs fell to the lowest level this year.

Citi and Bank of America, which have been reporting the highest charge-off rates among the top six issuing banks all year, showed the most improvement.

Among the top six, only Capital One posted an increase in defaults, but its 8.38 percent rate remained well below its March peak for the year of 10.87 percent.

Card companies typically write off loans after they are 180 days past due, the point at which it is assumed the balances won’t be able to be collected.

Banks wrote off record amounts of credit card debt in the past two years as customers failed to make payments amid high unemployment.

The overall industry charge-off rate from April to June rose to 10.66 percent of balances, according to the Federal Reserve. Charge-offs typically hovered between 3 and 4 percent in the years leading up to the recent recession.

Writedowns among the top six issuers have slowed since June, as have late payments. Earlier this week, JPMorgan Chase & Co. said in its quarterly earnings report it has lowered its estimate of future card losses. CEO Jamie Dimon said the bank expects the downward trend to continue, but added continued losses are linked to the unemployment rate. He estimated the bank’s card business will “bottom out” in the third quarter of 2011.

Five of the six card issuers reported payments late by 30 days or more fell to their lowest points of the year.

American Express Co., which caters to high-income customers, had the smallest delinquency rate, at 2.5 percent of balances. Across the banks with broader customer bases, delinquency rates ranged from 3.82 percent at Chase to 5.71 percent at Bank of America.

That indicates that customers have a better handle on managing their debt than in recent months, but it is still higher than historical ranges.

Bloomberg – Visa Inc. and MasterCard Inc. reached a settlement with the U.S. Justice Department to resolve a two- year probe over restrictions on merchants, while American Express Co. vowed to fight a government antitrust lawsuit.

“We want to put money in consumers’ pockets,” said Attorney General Eric Holder at a press conference today. “By eliminating credit-card companies’ anticompetitive rules, we will accomplish that.”

The settlements, which are subject to a federal judge’s approval, were filed in U.S. District Court in Brooklyn, New York, after the Justice Department sued the three credit-card networks.

Restraints on retailers by the payment networks “impose a competitive straightjacket on merchants, restricting decisions by them to offer discounts, benefits and choices to customers that many merchants would otherwise be free to offer,” the Justice Department said in the lawsuit.

The settlement is designed by the department to give merchants more freedom to influence customers on what form of payment they choose, letting retailers offer discounts, rebates or enhanced services depending on what card customers use. That practice had been prohibited by contracts offered by the credit- card networks.

No Monetary Obligation

Visa said in a statement the networks won’t be required to make any payments as part of the settlement.

Assistant Attorney General Christine Varney, head of the Justice Department’s antitrust division, said the case won’t be over as long as American Express doesn’t comply with the new rules.

“American Express’s rules are the most restrictive,” she said, standing alongside Holder. They “restrain trade unnecessarily.”

“We have no intention of settling the case,” American Express Chief Executive Officer Kenneth I. Chenault said in a statement. “We will defend the rights of our card members at the point of sale and our own ability to negotiate freely with merchants.”

American Express spokesman Michael O’Neill said in an interview that the company is hiring attorney David Boies to handle its defense against the lawsuit. The company said it will hold a news conference at 4:15 p.m. New York time.

Retail Groups

Retail groups welcomed news of the settlement with Visa and Mastercard. “Merchants, small and large, welcome today’s news,” said John Emling, senior vice president of government affairs for the Retail Industry Leaders Association in an e- mailed statement today. “Credit and debit networks operate within a broken market where a few dominant firms set fees and dictate terms with impunity.”

American Express, in vowing to fight the lawsuit, called it “a significant retreat” from previous Justice Department efforts to promote competition in the payments industry.

American Express fell $2.63, or 6.3 percent, at 3:02 p.m., the most since Jan. 22, in New York Stock Exchange composite trading and was the day’s worst performer in the Dow Jones Industrial Average. MasterCard dropped $1.78, or 0.8 percent after falling as low as 2.6 percent earlier, and Visa rose 22 cents, or 0.3 percent, after declining as much as 1 percent.

To contact the reporters on this story: Sara Forden in Washington at sforden@bloomberg.net; Peter Eichenbaum in New York at peichenbaum@bloomberg.net.

To contact the editors responsible for this story: Larry Liebert in Washington at lliebert@bloomberg.net; Alec McCabe in New York at amccabe@bloomberg.net.

Monday, Baylor University’s bookstore was filled with students as many headed to their first class of the semester.
Many students were using credit cards to pay for their books. A new Credit Card Accountability, Responsibility and Disclosure Act is helping students better understand their statements. Even though the law was passed in May 2009, the final rules were put into effect this week.

Heather Dunnam is good about checking the prices for each book, but she admits the same cannot be said for how closely she looks over her credit card statements.

“I definitely just look at it when I can, and I’m not the best at taking that time,” she said.

The new set of rules will help Dunham better understand her statement.

According to University of Baylor Associate Professor of Finance Franklin Potts, the last set of rules focuses on fees and interest rates.

Under the latest change to regulate certain practices by credit card companies, consumers can no longer be charged a fee for not using their card.
While there are fees for late payments, it is limited to $25 in most cases. Credit card holders can also avoid over-the-limit fees all together by opting to cap their spending once they reach their credit limit.

But Franklin said credit card companies will probably make changes of their own.

“Before there were a lot of credit cards, you could get with no annual fee. Most experts believe more and more people will have to pay a fee especially if you have bad credit,” he said.

The new rules also involve changes on how credit card companies handle interest rate changes.

Consumers must be notified 45 days before companies make changes to interest rates. Also, companies must now provide a reason for the change in rates and reevaluate the rate every six months.

“What credit card companies have done to protect themselves against this new law, they’re going more and more to variable rate credit cards,” Potts said.
Regardless, Dunnam said she is looking forward to the changes.

“I think most of these changes are going to be really positive,” she said. “Especially for students, my age, who might not be the best at figuring out finances for themselves.”

But Potts is not so optimistic.

“No matter what kind of legislation they pass, somebody will always find another way to confuse consumers and take advantage of them if they don’t understand finance,” he said.

While many of the rules apply to credit cards, your gift card is no longer subject to annual fees or inactivity fees. The card can still be closed though.

Contact your credit card company to find out if your account is affected by the new rules.

SAN FRANCISCO (MarketWatch) – Visa Inc. and MasterCard Inc. shares climbed Monday as U.S. politicians reached an agreement on the regulation of interchange, or “swipe,” fees on credit and debit card transactions.

Assistant Senate Majority Leader Dick Durbin said in a statement that an agreement was reached on his amendment regulating such fees. The new language is expected to be eventually accepted by the group of politicians that are trying to craft a final Wall Street reform bill by early July, he added.

“We were able to reach an agreement, which makes minor changes to strengthen consumer protections and bring competition to a market where there is none,” Durbin said in a statement.

Visa shares gained 5% to close at $80.90 while MasterCard rose 4.2% to close at $223.34 on Monday.

Interchange fees are small charges that merchants pay Visa (V 80.99, +0.09, +0.11%) and MasterCard (MA 223.25, -0.09, -0.04%) for the right to accept debit and credit cards run on their payment networks. Those fees are then passed on to card issuers such as the big banks.

Almost $50 billion in interchange fees was collected last year and roughly 80% of that money went to the 10 largest banks in the U.S., including Bank of America Corp. (BAC 15.82, +0.03, +0.19%) and J.P. Morgan Chase & Co. (JPM 38.95, +0.08, +0.21%) , according to Durbin’s office.

Visa and MasterCard shares dropped in May, partly on concern about potential tough limits on interchange fees.

On Monday, Durbin’s office released modifications to his amendment on interchange fee regulation.

One change would allow the Federal Reserve to adjust interchange fees if card-issuing banks can show that an increase is needed to cover fraud-prevention costs.

The interchange rules passed by the Senate would have stopped Visa and MasterCard from preventing merchants from offering discounts to customers to use one network versus another. This provision has been removed from Durban’s modified amendment. In its place is a compromise that would direct the Fed to issue rules preventing networks from requiring that their debit cards only be used on one network.

The original interchange rules defined interchange fees to include debit card fees established by Visa, MasterCard and other networks that accrue to either the bank issuing the card or the network itself.

Monday’s modification states that the Fed can’t regulate network fees, which are fees that Visa and MasterCard charge and keep for themselves. The Fed would only have power over these fees to make sure they aren’t used to get around interchange fee regulation, Durbin explained in a statement.

Despite these changes, the rules will still introduce some limits on interchange fees.

“This agreement is a major victory for small business owners and consumers fed up with big bank and credit card industry rip-offs,” Rep. Peter Welch (D., Vt.) said in a statement. “It preserves key protections for the grocers, retailers and country store owners most affected by out-of-control swipe fees, while addressing legitimate concerns of the industry.”

A spokesman for Visa declined to comment.

Alistair Barr is a reporter for MarketWatch in San Francisco.

NEW YORK (Dow Jones)–The Qatar Investment Authority has been interested in buying Citigroup Inc. (C) stock from the U.S. Treasury Department, according to a person familiar with the matter in the Persian Gulf, and a person in the banking industry.

Discussions about a potential purchase started months ago, and are, according to one of these people, ongoing. QIA’s interest was reported by the Financial Times earlier Wednesday.

Treasury, meanwhile, announced Wednesday it sold 1.5 billion Citi shares it received as a result of government aid given to the bank in the financial crisis. After the sale, it holds 6.2 billion Citi shares, about 22% of the stock, which it plans to continue to sell in open-market transactions.

Citi’s shares rose 2.1% Wednesday, to $3.86.

The QIA’s interest in Citigroup’s stock may not result in any purchase of the shares. Still, its interest illustrates that, despite the pummeling its shares took in the financial crisis, Citi’s relationship with Middle Eastern investors remains intact.

A QIA representative didn’t respond to a request for comment; a Citi spokesman declined to comment about a potential investment by QIA.

A Treasury spokesman said Wednesday, “We have given discretionary authority to Morgan Stanley to sell our shares at the market pursuant to a written trading plan. We are not involved in soliciting or approving orders.”

Customarily, a block sale would be negotiated at a discount to the market value of Citi’s stock, a source said. But any discount is a tricky, if not impossible, proposition for the Treasury, which wants to maximize the value of its Citi stake in the interest of U.S. taxpayers. Selling stock into the open market is politically the safest way of disposing of the stake for the Treasury, because any sale of Citi stock by the Treasury will likely increase the value of Citi’s shares as investors cheer the government’s exit, and the Treasury might come under criticism if it sold at a discount.

Treasury made about $1.32 billion from selling Citi stock, it said, or about 88 cents per share. The sale was made at an average share price of $4.13; it had gotten the shares at $3.25.

A Citi spokesman said, “We are pleased the Treasury is making significant progress in profitably selling its common shares in Citi.”

At least one large Middle Eastern investor has taken losses on its Citi stake. The Abu Dhabi Investment Authority has sought arbitration over its November 2007 investment of $7.5 billion in mandatory convertible notes which could lead to billions in losses. Citi said it believes the allegations are entirely without merit. A spokesman for ADIA declined to comment.

Some other Middle Eastern investors were more fortunate in their Citi investments. In January 2008, the Kuwait Investment Authority was one of several investors in a $12.5 billion capital raise by Citi. Late last year, Kuwait said it sold its entire Citi stake for a $1.1 billion profit, or a 36.7% return on its initial $3 billion investment. [The Government of Singapore Investment Corporation Pte Ltd. also did well with its investment.] And Prince Alwaleed Bin Talal, Citi’s biggest individual shareholder, has owned shares since the 1980s.

Citi Chief Executive Vikram Pandit and other senior executives have been to the Middle East to reassure investors. Prince Alwaleed, one of the bank’s most important supporters through this and previous crises, said last month the bank “has demonstrated its ability to overcome the recent economic obstacles.” In January, he sounded a more critical note when he told Fox Business Network that 2010 was the year Pandit had “to deliver” results at Citi.

Sheikh Hamad bin Jassem Al Thani, Qatar’s Prime Minister, told Dow Jones Newswires in an interview in January 2008 that QIA, the emirate’s sovereign wealth fund, would invest up to $15 billion in “blue-chip” European and U.S. banks. “We see an opportunity in U.S. banks” said the sheikh, who is also chief executive of the QIA.

Now QIA’s interest underlines how attractive Citi’s stock has become for certain private investors. Last year, hedge funds took notice of Citi’s battered stock–and judged its prospects for recovery to be good. Several, including Paulson & Co Inc., made big investments. Other institutional investors, namely mutual funds, appear to be holding back until the Treasury has sold its stake.

-By Matthias Rieker, Dow Jones Newswires; 212-416-2471; matthias.rieker@dowjones.com

(Andrew Critchlow, Chip Cummins, Randall Smith, and Maxwell Murphy contributed to this article.)

by David Jackson – Starting today, credit card companies have to give you ample notice if they change credit card rules.

“These new rules don’t absolve consumers of their obligation to pay their bills,” President Obama said today in hailing the effective date of legislation he signed back in the spring. “But they finally level the playing field so that every family and small business using a credit card has the information they need to make responsible financial decisions.”

USA TODAY’s Sandra Block explains the new credit card rules here.

Here’s more of Obama’s take:

For too long, credit card companies have had free rein to employ deceptive, unfair tactics that hit responsible consumers with unreasonable costs. But today, we are shifting the balance of power back to the consumer and we are holding the credit card companies accountable.

The new rules taking effect today mean that credit card companies can no longer retroactively increase rates or increase rates in the first year you open an account, charge misleading late fees or use over-limit fee traps. They’re now required to send ample notification if they plan to make changes to the terms of your card and they must employ clear, simple standard payment dates and times.

There are new protections for underage consumers, restrictions on double billing and caps on high-fee cards. The new rules are an unprecedented step in my administration’s ongoing efforts to strengthen consumer protections and enact meaningful financial reform.

(Posted by David Jackson)

By Kevin Crowley and Hugh Son
(Bloomberg) – American International Group Inc. lowered its debt by $25 billion as the company transferred two overseas life insurance units destined for sale to Federal Reserve vehicles.

AIG reduced its debt on a Federal Reserve credit line by $16 billion through the handover of American International Assurance Co. and $9 billion with the transfer of American Life Insurance Co. The moves lower principal borrowing on a Fed credit line to $17 billion, New York-based AIG said in a statement today.

AIG plans to sell AIA and Alico to rivals or private-equity buyers or in initial public offerings “depending on market conditions,” the insurer said. The company said it will take a $5.7 billion charge in the fourth quarter tied to a reduction in the credit line, in addition to a previously disclosed $1.4 billion accounting expense linked to the sale of a Taiwan unit.

“AIG continues to make good on its commitment to pay the American people back,” Robert Benmosche, the insurer’s chief executive officer, said in the statement. AIG expects “volatility in reported results in the coming quarters due in part to charges related to ongoing restructuring activities.”

AIG is entitled to a portion of the proceeds if the sales reap more than $25 billion. The Fed has a preferred interest in the vehicles holding the units.

The plan to transfer the businesses was disclosed in March amid the company’s fourth bailout. The deal allows AIG to pay down its debts while waiting for credit markets to recover, which may yield higher sale prices for the assets.

China, India

AIA operates in countries including China, India, Korea, Australia, Singapore, Malaysia, Thailand, Vietnam and Indonesia. Alico operates in more than 50 countries, including parts of Europe, Latin America, the Caribbean, the Middle East and Japan. AIG restructured management at the operations to prepare them for independence.

European insurers including Prudential Plc and Assicurazioni Generali SpA and Canada’s Manulife Financial Corp. were among companies interested in buying parts of the life insurance units.

The insurer’s bailout was valued at $182.5 billion in June, including a $60 billion Fed credit line, a $70 billion investment from the Treasury and $52.5 billion to fund two vehicles to retire credit-default swaps and AIG’s securities- lending program.

AIG has struck deals to sell more than $12 billion in assets including a U.S. auto insurer, banking units and a Japanese office tower since the rescue.

The total size of the Fed credit line has been reduced to $35 billion from $60 billion, AIG said in the statement, contributing to the fourth-quarter charge.

To contact the reporters on this story: Kevin Crowley in London at kcrowley1@bloomberg.net; Hugh Son in New York at hson1@bloomberg.net