The Fed bails out AIG

I'm speechless.  The Fed just basically bought AIG:

In an extraordinary turn, the Federal Reserve agreed Tuesday night to take a nearly 80 percent stake in the troubled giant insurance company, the American International Group, in exchange for an $85 billion loan.

The Federal Reserve and Goldman Sachs and JPMorgan Chase had been trying to arrange a $75 billion loan for the company to stave off the financial crisis caused by complex debt securities and credit default swaps. The Federal Reserve stepped in after it became clear Tuesday afternoon that the banking consortium would not be able to complete the deal.

Without the help, A.I.G. was expected to be forced to file for bankruptcy protection.

This is the Hail Mary Pass of the end game.  The Fed can't keep jamming bad debt into its portfolio indefinitely.

On an amusing note, this gives whole new meaning to the words "social insurance".