From CNN:

Troubled insurer American International Group got a new, $152.5 billion deal from the federal government on Monday, as the Federal Reserve and Treasury Department made significant changes to the terms of the company’s original bailout.

The Fed announced that it will reduce AIG’s original $85 billion bridge loan to $60 billion, and it will cut the interest rate by 5.5 percentage points.

In addition, the Treasury will use its special authority under last month’s $700 billion bailout law - the so-called Troubled Asset Relief Program - to purchase $40 billion in preferred stock.

The new bailout was worked out between government officials and AIG executives over the weekend. AIG was having difficulty paying back its original bridge loan, which it intended to use to sell off many of its subsidiaries to restore the company to a stable condition. But the credit crisis has proven to be a difficult environment to spin off assets.

“The original bailout was just too onerous for the timing and the cycle,” said Andrew Barile, an insurance consultant at Andrew Barile Consulting Corporation. “People also underestimate the time it takes to selloff assets of an insurance company, which takes months and months.”

Furthermore, the company’s investors continued to demand that the insurer post collateral to back its credit default swap agreements - essentially insurance contracts that AIG had sold to customers worldwide - forcing AIG to borrow more and more from the government. As the company drew down billions, the high interest rate on the original loan became too punitive.

“The Treasury determined AIG was a systemically significant institution,” a Treasury official said. “Bringing more equity to the company puts AIG in a better position to dispose of its assets, and it was done to protect the taxpayer.”

It didn’t take them too long to blow through the first bailout; now AIG gets another $150 billion to play with.

AIG and you, originally uploaded by swanksalot.