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ALEX CHADWICK, host:

And there's more financial news today on the giant insurance company, AIG. This is the one that made such big news last month when there was an $85 billion lifeline from the Federal Reserve to keep it in business. Reporting today, Sudeep Reddy of the Wall Street Journal. Sudeep, apparently, 85 billion was not enough. They're going to get more money?

Mr. SUDEEP REDDY (Reporter, The Wall Street Journal): They are going to get more money. They're going to get about $38 billion, and access to that money is really important for keeping the company afloat. And all of this really just shows how much the situation has deteriorated for the company, for markets, for the global economy overall in the last couple of weeks because $85 billion, of course, is an enormous amount of money and should have been enough to cover whatever AIG needed.

CHADWICK: But now, they need almost another 40 billion. Explain to us, if you can, simply, to listeners, why is it so important for the government that AIG survive?

Mr. REDDY: AIG is really a company has its tentacles in a lot of parts of the financial system, and it's linked to mutual funds, and it's linked to insurance contracts, called credit default swaps, and there's a big fear that, if AIG were to fail, it would create this systemic problem, a ripple effect throughout the financial system that may be far worse than anything we have seen with the failures of other companies.

And keeping that from happening is a key goal for the government, and that's why it stepped up with this $85 billion loan last month, taking a lot from AIG, an 80 percent stake in the company. And so, this is effectively the government now doing what's necessary to keep the company afloat. The latest loan, though, is a lot less risky to taxpayers than the original one was because now, this one is tied to the regulated insurance company of AIG and its assets, whereas the earlier one was linked to the stock of AIG and the non-regulated companies.

CHADWICK: You know, in the paper today, AIG was supposed to sell off some of its assets in order to pay back this $85 billion. It hasn't done any of that in the last month since it got this loan. Why not?

Mr. REDDY: The company is in the process of doing that, but it's facing several problems right now. One is that the market overall and just conditions overall have deteriorated so much that there really aren't other firms that are able to suddenly step up and buy a company like this. The other risk is that, if you were to do it now, you'd be selling at fire sale prices, and you don't want to do that. The government has a stake in this, so it's to taxpayers' benefit to try to keep it operating as long as possible to extract as much as possible from a sale. And the loan was for two years, and so it was intended to take up to that long to sell these businesses and not a matter of weeks, as we've seen so far.

CHADWICK: Sudeep Reddy of the Wall Street Journal on today's more bad news about insurance giant AIG. Sudeep, thanks.

Mr. REDDY Thank you, Alex.

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