AIG's Black Box

The fourth rescue is not a charm.

Say this for the Treasury and New York Federal Reserve: At least they've gained a sense of humility. Unveiling the fourth draft of their AIG bailout yesterday, the feds were unwilling to rule out number five. Fixing AIG "will take time and possibly further government support," the regulators declared. Perhaps someday the feds will even explain to taxpayers which AIG creditors had to be rescued and why.

Yesterday's changes reduce the interest that AIG will be required to pay taxpayers, while increasing taxpayer risk by exchanging some debt for equity. AIG will receive access to another $30 billion from the Troubled Asset Relief Program, for a total of up to $70 billion, and on better terms. The New York Fed will also reduce the rate it charges AIG on a revolving credit line, and forgive some of AIG's debt in exchange for interests of up to $26 billion in two AIG life insurance subsidiaries. The New York Fed will also loan up to $8.5 billion to vehicles holding pools of AIG life insurance policies...

WSJ: AIG's Black Box