"As of June 30, [AIG's] balance sheet shows total assets of $1.05 TRILLION, against liabilities of $972 billion... AIG contains a great many very healthy, very well-capitalized, very profitable businesses, and it generates enormous cash flow... [it] became clear to Treasury and Fed officials that they didn’t want to see an 11 filing, with technical defaults all over a $1 trillion asset portfolio."
"The New York Fed will create a special credit facility for AIG. It will last for 24 months, during which time AIG may borrow up to $85 billion, at an interest rate of three-month dollar LIBOR plus 850 basis points.
"That’s about 14% or so at the moment. You need the interest rate to be a penalty rate, to force AIG to use other capital sources in preference. The new facility is only for use as a last resort. Otherwise AIG would have an overwhelming, unfair competitive advantage. It's quite likely that AIG will end up never borrowing from the $85 billion credit line at all...
"It’s expected that the company will use the 24 months to sell off its assets and pay its obligations as they come due, becoming a continually-smaller company in the process."
Read the whole post to get his initial summary of the situation.
UPDATE: RWN has a post which shows that McCain was ahead of the curve on the whole Fannie/Freddie situation, with excerpts from a McCain speech addressing his fellow congressional colleagues in 2005. QandO points out that Bush was ahead of the curve five years ago.