Good money after bad

Well, it's a good thing the seat-of-the-pants economic policy being worked out in D.C. through bipartisan cooperation is having such excellent results. After all, if you're going to throw around hundreds of billions of dollars of other people--

What's that? You say the money is doing no good and the feds are ordering up more?

Troubled insurer American International Group got a reworked $152.5 billion deal from the federal government 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, cut the interest rate by 5.5 percentage points and extend the borrowing period to five years from two years.

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.

It seems that even after an infusion of taxpayer cash, AIG is still tottering or, as the news report put it, "having difficulty paying back its original bridge loan."

So, what's the prognosis for the new patch-work fix to a company that seems to have outlived its allotted free-market lifespan? Mmmm ... Not so good.

Andrew Barile, an insurance consultant at Andrew Barile Consulting Corp., said the bailout will help ease AIG's need to continue to post more collateral. But he said the company will continue to have trouble selling off its subsidiaries. In the current environment, other smaller companies may rather pluck talent away from AIG than assume its unwanted companies.

"People also underestimate the time it takes to sell off assets of an insurance company, which takes months and months," said Barile.

It's nice to know that there's continuity in Washington, D.C., even after a hard-fought election campaign. Continuity of massively expensive and apparently ineffective policy, that is.

Meanwhile, the auto industry is next in line for its turn at the trough. I'm sure that will work out much better.