1) So AIG has a market cap of $7 billion. 2) The federal reserve acts as a "white knight" and buys an 80% stake in the company in exchange for an $85 billion loan. 3) 2.69 billion shares outstanding before. 13.45 billion shares after. 4) Federal Reserve bought shares. For every 1 share bought, the federal reserve loaned $7.90. I wonder what the interest rate is? 5) Since this is a loan which must be repaid and not a capital infusion (or is it), how does this change the balance sheet of AIG. Sure it can now meet its CDO obligations today, but it still has negative equity and will likely for time to come. Where is Paul Volcker? Surely this arrangement exceeds the Federal Reserve's legal authority. The Fed has the right to do an emergency loan to a non-depository institution at rate equal to the discount window if no other financing is available and failure of the institution could harm the economy. But the Fed can't buy these bullshit shares causing mass dilution for existing shareholders of the company and effectively controlling it. Let the treasury do that nonsense. This is not a role for the Fed. Jim Bunning and Ron Paul must be like, "HOLY SHIT. THEY DID WHAT?!?"