The 83 year-old Maurice "Hank" Greenberg (left) pictured in happier times as Chairman and CEO (from 1968-2005) with the AIG Board. Behind him was Martin Sullivan (white hair) who succeeded him and was forced out last summer. Greenberg is reported to have lost $6 billion in recent weeks as AIG's shares vaporised. In 2004, Starr International (SICO), a private Panamanian company, which has assets worth more than $20 billion, and Starr International Charitable Trust, moved their headquarters to Dublin from Bermuda. Starr International Charitable Trust of Dublin is the ultimate beneficiary of SICO should the latter ever be dissolved. The structure is similar to the Irish Times where a standard limited company runs the operations while it is ultimately controlled by a charitable trust. SICO is controlled by Greenberg and he is also chairman of the charity. It is named after AIG founder Cornelius Vander Starr. Starr received $110m-worth of AIG stock in 1970, after the insurer's initial public offering. AIG's “unprecedented act of individual generosity allowed SICO to inaugurate a tradition of providing very long-term incentives to key managers of American International companies around the world” , according to the insurer's annual report for 2002.

In a dramatic development on Tuesday, the US government seized control of AIG - American International Group, one of the world's biggest insurers - in an $85 billion loan deal that gives it 80% of the shares. A 2 year loan will carry an interest rate of LIBOR (London interbank offered rate) plus 8.5%. US Treasury Secretary Henry Paulson insisted that AIG's chief executive, Robert Willumstad resign.

After talks on a private loan deal to prop up the embattled insurer had failed, the federal government reversed its position that there would be no public bailout as fears of systemic risks grew. Simply, AIG was too big to fail.

Under the terms agreed on Tuesday night, the Fed will lend up to $85 billion to AIG, and the US government will effectively get a 79.9% equity stake in the insurer in the form of warrants called equity participation notes.

The loan is secured by AIG's assets, including its profitable insurance businesses, giving the Fed some protection even if markets continue to fall. And if AIG rebounds, taxpayers could reap a big profit through the government's equity stake.

The Federal Reserve said in a statement that "in current circumstances, a disorderly failure of AIG could add to already significant levels of financial market fragility and lead to substantially higher borrowing costs, reduced household wealth, and materially weaker economic performance.  

The purpose of this liquidity facility is to assist AIG in meeting its obligations as they come due. This loan will facilitate a process under which AIG will sell certain of its businesses in an orderly manner, with the least possible disruption to the overall economy. 

The AIG facility has a 24-month term. Interest will accrue on the outstanding balance at a rate of three-month Libor plus 850 basis points. AIG will be permitted to draw up to $85 billion under the facility. 

The interests of taxpayers are protected by key terms of the loan. The loan is collateralized by all the assets of AIG, and of its primary non-regulated subsidiaries.  These assets include the stock of substantially all of the regulated subsidiaries.  The loan is expected to be repaid from the proceeds of the sale of the firm’s assets. The US government will receive a 79.9 percent equity interest in AIG and has the right to veto the payment of dividends to common and preferred shareholders.

"This loan will facilitate a process under which AIG will sell certain of its businesses in an orderly manner, with the least possible disruption to the overall economy."

US Treasury Secretary Paulson is reported to have personally told CEO Robert Willumstad in a phone call on Tuesday, that he must resign.

Willumstad is to be succeeded by Edward Liddy, the former head of insurer Allstate Corp.

AIG's financial-products unit sold credit-default swap contracts designed to protect investors against default in a range of assets, including subprime mortgages.

However, as the housing market slumped, AIG reported $18 billion in losses over the past three quarters.

Following 3 double-digit declines in the share price this week, the stock is down 94% in 2008.

Before being forced out in 2005, former Chairman CEO, Maurice R. "Hank" Greenberg built AIG into a global powerhouse over a 37-year period, that includes one of the world's biggest aircraft leasing firms.

Treasury Secretary Paulson and Federal Reserve Chairman Ben Bernanke went to Capitol Hill Tuesday night to brief lawmakers. One of the key triggers for the bailout was the fear that a collapse would set off a public panic even though AIG's subsidiaries were not in peril.

SEE: CNBC video of analysis of bailout

CNBC Interview with Maurice "Hank" Greenberg