Roughly half of the $180 billion the government has given AIG has already flowed

The state of California, for example, collected $1 billion

More than $12 billion in federal bailout funds paid to AIG went to more than 20 states

Some $80 billion

also went straight to banks and investment firms around the world that did business with AIG

it’s entirely possible that AIG’s failure could bring down one or more big banks

The problem is that the world’s banks are interconnected in a kind of global river of money that we all rely on to keep the economy moving

If too many banks fail, that river starts to dry up. With the economy in a steep decline, we need money flowing through the system faster — not slower.

AIG's

insurance operations were doing just fine until a tiny piece of the company called the Financial Products division started

uaranteeing investments — many of them backed by subprime mortgages

What the government is hoping to do now is keep AIG afloat long enough to sell it off in pieces.