Well, the initial $85 billion wasn’t enough to rescue American International Group Inc. (AIG). The Federal Reserve Board said Wednesday it would lend AIG up to $37.8 billion more to help infuse fresh liquidity into its operations. News of the additional $37.8 billion in aid came less than a month after the Federal Reserve bailed out the giant insurer and just two days after the Committee on Oversight and Government Reform grilled AIG in an attempt to uncover regulatory mistakes and financial excesses that led to AIG’s need for an initial government bailout. The original $85 billion credit facility was collateralized by AIG’s entire asset base, essentially, providing overcollateralization that the Fed said would protect taxpayer interests. The insurer was to begin what the Fed called an “orderly” sale of its assets at the time of its takeover, making the transaction akin to a bankruptcy filing without the actual bankruptcy. The proceeds from those sales would be used to pay back the loan. But a particular program put AIG in a world of trouble. The program involved securities held by strictly regulated units that sell life insurance policies, explained the Wall Street Journal. Under this program, AIG lent out securities to third parties and received collateral in return — collateral that it invested in other assets like mortgage-backed securities, and we all know how that story goes: many of those assets lost value. When the borrowers of the securities returned them for money back, AIG had to make up the difference. The insurer found it increasingly difficult to lend the securities back out. With the new plan, the Fed is offering to take up to $37.8 billion worth of those securities from AIG, and give the company cash in return. It “will allow AIG to replenish liquidity, while providing enhanced credit protection to the New York Fed and U.S. taxpayers in the form of a security interest,” said the Federal Reserve Board of Governors in a statement Wednesday. All in all, the Fed has agreed to make nearly $123 billion available to AIG. “How could this company have gotten itself into a position where it is reliant on the government for almost $125 billion of liquidity funding?” UBS credit analyst David Havens said to the Wall Street Journal. “Eighty-five billion was breath-taking.” “It’s not the hope” that the Fed is stuck with assets that are worth less than the cash paid for them, said AIG spokesman Nicholas Ashooh to Bloomberg News. AIG, playing amongst a battered market, hopes the new plan will help it to arrive at a long-term solution. But given that AIG has called for lifelines twice in recent weeks, just how much more is there to go before the bleeding stops? Disclosure: The author held no relevant positions when this story was published. Indirect holdings may exist via mutual fund investments. HW reporters and writers follow a strict disclosure policy, the first in the mortgage trade. Editor’s note: To contact the reporter on this story, email [email protected].