AIG is gigantic. Almost all divisions of AIG are quite profitable. They just have one or so that were involved in complex derivatives transactions that was losing huge amounts of cash. AIG needed about $70 billion to make payments coming due for that division. AIG's credit rating was then downgraded, making it almost impossible for them to obtain additional needed financing. In stepped the government with a "bailout."
This could wind up being hugely profitable. The money loaned to AIG is at LIBOR plus 8.5% (which is about 11.5% right now). Plus, the government gets almost 80% ownership of AIG. They can sell off bits and pieces of AIG (which are hugely profitable) in an orderly fashion and make a ton of money in the process. The markets will like the orderly restructuring as opposed to the fire sale that would have happened if the government doesn't step in.
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