The standby capital facility is one of a number of measures being implemented by AIG, Treasury and the Federal Reserve to help stabilize the company. In a joint statement, Treasury and the Fed on Monday announced a restructuring of the government's aid to AIG. These actions mark the fourth time the government has stepped in to prop up the ailing insurer since the initial bailout last September.

Among other steps, Treasury will swap its $40 billion of cumulative perpetual preferred shares for new preferred shares with terms that more closely resemble common stock. The Fed has reduced the $60-billion revolving credit facility established for AIG last September in exchange for preferred interests in two special purpose vehicles created to hold all of the outstanding common stock of American Life Insurance Co. and American International Assurance Co., two life insurance holding company subsidiaries of AIG.

AIG will retain control of ALICO and AIA, although the New York Fed will have "certain governance rights to protect its interests," according to the Fed/Treasury joint statement. The valuation for the New York Fed's preferred stock interests, which could range up to $26 billion, will be a percentage of the fair market value of ALICO and AIA based on valuations acceptable to the New York Fed, according to the statement. The Fed is authorized to make loans of up to $8.5 billion to the SPVs; proceeds from the loans would be used to pay down the revolving credit facility.