Update: AIG Gets $40 Billion Stake:

In a record bailout of a private company, the government on Monday provided a new $150 billion financial-rescue package to troubled insurance giant American International Group, including $40 billion for partial ownership.

Who is starting to think the bail out is one big sink hole?

The Financial Times article, AIG in Talks for New Bail Out:

AIG is asking the US government for a new bail-out less than two months after the Federal Reserve came to the rescue of the stricken insurer with an $85bn loan, according to people close to the situation.

AIG's executives were last night locked in negotiations with the authorities over a plan that could involve a debt-for-equity swap and the government's purchase of troubled mortgage-backed securities from the insurer.

More Details:

One of AIG's proposals to the Fed is to swap the loan, which gave the authorities an 80 per cent stake in the company, for preferred shares or a mixture of debt and equity.

Such a structure would reduce the interest rate to be paid by AIG and possibly the overall amount it has to repay. An extension in the term of the loan from the current two years to five years is also possible, according to people close to the situation.

I thought the US already controlled 80% of AIG.