AIG Bankruptcy Threat Forced Fed's Hand

Editor's note: Our "On the Brink" series will provide daily insight into the financial firms facing capital shortfalls and the growing pressure from short sellers in the market.

Updated from 5 a.m. EDT

A potentially market-rattling bankruptcy filing by American International Group (AIG Quote) forced federal officials to reverse course and pursue a costly bailout of the insurance giant late Tuesday.

AIG will receive an $85 billion bridge loan from the Federal Reserve aimed at keeping the giant insurer out of bankruptcy and preventing the acceleration of a world credit crisis. ...