U.S. government extends new $30B aid package to AIG

— -- The company has burned through cash and has been unable to find buyers for pieces of its business that it hoped to sell to repay the government on its existing aid package, which totals some $150 billion.

The new package calls for the Federal Reserve to take stakes in two international units.

Instead of paying back $38 billion in cash with interest that it has used from a Federal Reserve credit line, AIG now will repay that amount with equity stakes in Asia-based American International Assurance Co. and American Life Insurance Co., which operates in 50 countries.

In addition, the government will convert its previous investment in so-called preferred shares into shares that don't receive a dividend payment. Also, the government will gain a stake in two of AIG's insurance subsidiaries as payment for $35 billion of previous loans.

"All of us are paying for this," says Donn Vickrey of research firm Gradient Analytics. "It's a disaster."

AIG's solvency, and preservation of its credit rating, is vital, as it was one of the largest writers of complicated financial derivatives, says Cathy Seifert, stock analyst at Standard & Poor's. If AIG had trouble making good on some contracts, global financial pain would deepen, she says.

The financial system's fragility is unnerving investors. Stocks, measured by the Dow Jones industrial average, declined last month for the sixth month in a row for a cumulative loss of 38.8%.