Remember when the economy was really, really bad and the Federal Reserve decided they absolutely had to give AIG an $85 billion lifeline or else there would be a financial apocalypse? Well, its three weeks later and the economy is now really, really, really bad and the Fed has decided that it absolutely must give the world’s largest insurance company $34 billion more of the taxpayers money.

The original need to rescue AIG– now 79.9 percent owned by the U.S. taxpayers– largely stemmed from the company’s insanely risky reliance on credit default swaps, essentially wagers on what mortgage backed securities would succeed or fail. But the Wall Street Journal’s Liam Pleven, Sudeep Reddy and Carrick Mollenkamp report that the once mighty company had another vice: securitizing life insurance policies.

Trading partners are no longer willing to buy these securities from AIG. But, of course, the Fed is.

Like Tom Buchannan in the Great Gatsby, AIG keeps breaking things and leaving it to others, in this case the federal government and the entire worldwide economy to clean it up.-MB

The New York Times’ William Glaberson reports that one day after a federal district judge freed 17 Chinese Muslims detained at Guantanamo Bay, the Justice Dept. successfully sought an "administrative stay" that will keep the Uighar Muslims detained. The Justice Dept. has been highly energetic over the last two days arguing that the executive branch, not U.S. District Judge Richard M. Urbina, doesn’t have the power to release detainees of the "war on terror."

Yet all sides concede that the Uighars aren’t terrorists at all. The 17 men were caught doing weapons training in Afghanistan. Because they advocate independence from China, their native country might torture the Uighurs on returning.

Almost no other country will take the detainees out of fear of offending China. What’s the rationale for the U.S. not allowing these 17 people to seek asylum here?-MB

That’s a question being asked as the Pentagon and State Dept. scramble to revamp their approach to Afghanistan with a few weeks left in the Bush administration. The Washington Post’s Karen DeYoung reports that both Defense Secretary Robert Gates and Secretary of State Condoleezza Rice have agreed for most of the calendar year that the U.S. plan in Afghanistan– and also Pakistan– is in disarray.

Lt. Gen. Douglas Lute, a White House adviser on both Iraq and Afghanistan, is pushing Gates and Rice to ask back-to-the-basic questions like what are the U.S. objectives, resources levels and allies. Lute also wonders if the Afghanistan and Pakistan governments can ever "rise to the occasion."

Unsurprisingly, though, it’s a bureaucratic mess to re-do a war plan almost seven years into a war. Any change in strategy would have take into account the covert operations by the CIA in western Pakistan. And as for determining that change, the State Dept., Joint Chiefs of Staff, military commanders on the ground and National Security Council may each have their own ideas.-MB