That line in the sand that the feds drew on Monday, deciding to let big banks fail rather than provide a government bailout, turns out to have been drawn in the sand.
The feds bailed out the giant insurer AIG Tuesday evening to the tune of an $85 billion loan.
AIG is the world’s largest insurer.
“It’s a dramatic turnabout for the federal government, which has strongly resisted overtures from AIG for an emergency loan or some intervention that would prevent the insurer from falling into bankruptcy,” the Wall Street Journal noted.
The company was so sure it was headed for bankruptcy, that it hired a law firm to draw up the papers, the New York Times reported.
AIG fired its CEO, Martin Sullivan, this summer for failing to warn investors about the company’s big losses in the derivatives market, tied to the failing mortgage industry.
He reportedly got $47 million to take a hike, according to Portfolio.com.