Phew, this is the news alright. AIG is not a US Government backed vehicle, it is a large private company, also it is owned in many US states. The US Federal Government has little legal precedent for suggesting it nationalise the group in return for $100 billion.
On the other hand, they would not do such a thing if they did not think such a thing was utterly needed. Clearly the health of the global financial system is at risk. The fight is now against a Depression, not a recession, led potentially by a real meltdown in financial services worldwide.
This is serious now, the Fed is acting like it did in 1930 and 1931 - let's hope it all works out better this time.
No point owning shares in risky/any US financial stocks now though, with shareholders likely to be wiped out....