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Fed mulls options to ease pressure on AIG

US federal officials are weighing various options to reduce the financial pressure on American International Group Inc including a change in the terms of a $85 billion loan, the Wall Street Journal reported.

The government may backstop AIG's credit default swap contracts and may also reduce the interest rate or extend the duration of the two-year loan facility, the paper said citing people familiar with the matter.

A government backstop would lift the pressure off AIG to keep posting tens of billions of dollars in collateral and some cash may flow back into government coffers if it returns the collateral already posted by the insurer, the paper said.

The insurer, saved from bankruptcy by a federal bailout, has reduced the amount it owes the US government for the second week in a row, according to Federal Reserve figures.

AIG currently owes $81.2 billion under two emergency facilities from the Fed.

AIG could not be immediately reached for comment. (Reuters)