AIG CEO Edward Liddy now says the company may need MORE than the $123 billion US taxpayers have given it to bail itself out of its derivative gambling bets.

Not to be nitpicky here, but has anyone done the maths as to how much capital this death star will require if every single CDS contract it wrote defaults?  Are the losses potentially infinite? (Really, are they?)  Could the entire global economy get sucked in?

Is it too much to ask that the government consider saying “Sorry, but that insurance contract you bought? We just ripped it up. Send your hate mail to [email protected]

Bloomberg: AIG, which averted collapse last month with a Federal Reserve loan, is dependent on “what happens to the capital markets,” Liddy, 62, said late yesterday on PBS’s “The NewsHour With Jim Lehrer.” AIG needed cash after credit downgrades forced the insurer to post more than $10 billion in collateral to clients who purchased guarantees on bonds that lost value.

“To the extent they continue to go down and we have to keep posting collateral, as it’s called in the vernacular of the industry, it’s possible it may not be enough,” Liddy said.

Liddy, the former Allstate Corp. CEO appointed by the government to run AIG last month, is selling businesses including U.S. life insurance, plane leasing and consumer finance to repay the loan. The New York-based company had tapped $82.9 billion, two-thirds of its total Fed credit line, as of last week and new figures may be disclosed today.

See Also: AIG: Are Taxpayer Losses Potentially Infinite?

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