Financial bonanza

The government on Monday unveiled a revamped rescue package to insurance giant American International Group and said it will provide the troubled company with another $30 billion in taxpayer money on an "as needed" basis.

The new package comes as AIG has burned through cash and been unable to find buyers for pieces of its company it hoped to sell to repay the government on its existing aid package, which totals some $150 billion.

This marks the fourth time the government has stepped in to help AIG. Its initial lifeline came in September, when the government in effect seized control, taking a nearly 80 percent ownership stake and replacing top management.

"Given the systemic risk AIG continues to pose and the fragility of markets today, the potential cost to the economy and the taxpayer of government inaction would be extremely high," the Treasury Department and the Federal Reserve said in a joint statement Monday.

Turning AIG into a smaller, more viable company "will take time and possibly further government support," the Treasury and the Fed acknowledged.

Indeed, many analysts say the U.S. will be forced to funnel billions more into the company. And they say AIG has become a bottomless money pit that poses a cautionary tale about the effectiveness of U.S. bailouts.

Mark Williams, professor of finance and economics at Boston University and a former Fed bank examiner, said he thinks at least $200 billion more will have to be extended to AIG.

"AIG is holding the U.S. government hostage at gunpoint," Williams said. "The government can’t cut its losses because it is too far into AIG. It has no choice but to keep on pumping money into the company."

In an interview on NBC’s "Today" show Monday, AIG Chairman and Chief Executive Edward Liddy said: "We’re going to be able to pay back the Federal Reserve. The new $30 billion is a standby line. It’s not necessarily something that we think we’ll have to draw on right away."

But Liddy, who joined AIG after its initial bailout and is being paid an annual salary of $1, backed off earlier statements about paying back taxpayers in full within two years.

"It is clearly our goal auto loan. But we need some help from the financial marketplace," he said. "The Federal Reserve debt we’ll pay back clearly in two years. And we’d like to make meaningful progress, paying back the original (government) investment."

The announcement came as AIG, once the world’s largest insurer, reported the biggest quarterly loss in U.S. corporate history. AIG managed to lose $62 billion in the fourth quarter, which had just 92 days. That’s $470,000 a minute. And it’s more than Bill Gates’ net worth.

The loss is about 12 times the $5.3 billion it lost in the same quarter of 2007. It is more than half the $114.53 billion lost by nearly all S&P 500 index companies combined in the quarter.

AIG lost more in the fourth quarter of 2008 than it made from 2001 to 2007, when income totaled more than $58 billion.

Beyond just financial markets, this supersize loss stands out.

•The $62 billion could have funded the salaries of every player of every Major League Baseball team in 2008, about 23 times. It also could have covered the salary of the New York Yankees’ Alex Rodriguez, the highest paid player in baseball in 2008 at $28 million, about 2,202 times.

•AIG’s loss is more than Bill Gates’ net worth of $57 billion as of last September, according to Forbes magazine’s "400 Richest Americans" list that had Microsoft Corp. founder Gates No. 1.

•The U.S. government provided $62 billion for immediate relief and rescue efforts in the months after Hurricane Katrina in 2005.

•If $62 billion was spread across the U.S. population, Americans could each get about $200.

•AIG’s loss amounts to 92 percent of the $67.4 billion that Americans spent at Wal-Mart in the fourth quarter, which includes the holiday season.

•It would take a person spending $1 million per day, everyday, for the next 169 years to spend as much money as AIG lost during the quarter.

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