This is not a "bail out" in the sense that AIG is in dire need.
I am not a member and could not read the entire article.
Other reports say that Goldman Sachs, JPMorgan Chase, and the Fed could put together a $70 billion to $75 billion line of credit, funded by a group of individual lenders.
A $ Trillion in assets? But what are the liabilities?
Lehman had $635 Billion in assets, but $613 Billion in liabilities, and some of those assets were surely derivatives that were priced at a higher value than what reality was.
AIG has a little over $200B in assets, a little over $300B in liabilities (including over $160B in long term low interest debt, which is not a problem because company is highly profitable and makes a lot of money on the borrowed capital) and over $650B in derivatives that need to be unwound in orderly and calm fashion to prevent serious disruption to the markets and economy.
We don’t want another “no-bailout” like Lehman which was too far gone to be “saved” and was not too big to fail (but still took the DJI down 500 points in panic atmosphere, with politicos taking advantage of it), though Fed and Treasury valiantly tried to prevent its bankruptcy and ensuing market panic. They did next best thing - prevented Merril Lynch from being the next link in the chain of financial targets by offloading it to BofA, just like they did with Countrywide earlier this year.
See this enlightening tidbit: Fed Repaid JPMorgan $87 Billion for Lehman Financing - http://www.cnbc.com/id/26746448/
You are right, it’s not a “bailout” of investors, Maurice “Hank” Greenberg lost $6B in stock in the last week alone; just 4 months ago AIG market cap was worth over $130B.
But neither is this a conventional “bridge loan” designed to leave the company intact. They are trying to avoid another “Lehman” on steroids, which is too big to fail - it’s an orderly liquidation and selling off pieces of public company that was attacked by short-sellers, through the Fed providing a DIP credit facility for the duration of the process. In fact, Treasury is practically running AIG already: “Former Allstate CEO Edward Liddy will be named the new CEO of AIG, which has avoided bankruptcy with the help of an $85 billion loan from the federal government, in exchange for an 79.9% stake in itself.”
Since there is nothing wrong with AIG’s business side - it’s actually a profitable company with good assets, there is even a good chance that taxpayers may make money on the deal over time. Government has no interest in running AIG, but neither will be there a rush to get rid of it, it’s not like it’s bleeding cash and its nominal “market cap” will no longer be relevant, just like nobody cares anymore about “market cap” of Fannie and Freddie.