Noam Scheiber explains why AIG is still taking on water. His diagnosis:

...the government needs to start figuring out which financial institutions can afford to get stiffed by AIG (by which I mean which ones won't go under if they get stiffed), and start stiffing them. You obviously want to do it in a careful and orderly way so as not to freak out the financial markets...This may be going on already--Treasury may simply be keeping quiet so it doesn't create a market panic. On the other hand, maybe there is no careful and orderly way to do something like this. Once you stiff the first counterparty, maybe everyone else assumes they'll get stiffed, and all hell breaks loose... 

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