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

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