AIG won't say it needs no more aid

— -- On Monday, AIG reported its worst quarterly loss ever: $24.47 billion for the third quarter of 2008. It also accessed U.S. government funds for the third time — getting $40 billion from the U.S. Treasury in exchange for preferred shares, raising the U.S. government's stake in AIG to more than $150 billion.

But Liddy points out the aid is not coming cheaply. The insurance giant also reworked the terms of the two previous loans it received, dropping the interest rate to 6% from 10%. But it also will pay a 10% annual dividend on the $40 billion in preferred shares. "We are paying the taxpayer handsomely for the help we're getting," says Liddy.

Not everyone is convinced taxpayers will come out ahead. "Whenever the government thinks it has a handle on AIG, the problems get greater … even AIG cannot model its own risks," says Richard Burson, professor of finance at Wharton Business School. That's because it has become extremely difficult to value the complex derivatives debt business that AIG got into, and the company has had to pony up billions in cash in recent weeks.

"The announcement of Bailout Two for AIG is an admission that Bailout One did not work," says Donald Light, senior analyst at Celent, a financial research and consulting firm.

Tuesday, Liddy had more controversy to deal with after an ABC News report that AIG held a sales meeting at a luxury resort in Phoenix last week. Liddy defended AIG, saying that it bore just 10% of the costs of the conference of brokers and consultants who sell financial products from AIG and other insurers, and that the meeting was essential to doing business. "Anything we do is incredibly scrutinized, and it's damaging to our employees," an aggravated Liddy said, adding that AIG has canceled 160 events so far. It has come under heavy criticism from lawmakers for extravagant retreats for employees even as it was taking emergency funding.