Gasparino on CNBC is reporting that the Gov't is starting to cave somewhat on the AIG bailout.

By now its old news, but to recap - the issue isn't AIG's P&C lines, etc, but rather their exposure to other financial products. AIG is a counter party to billions of credit default swaps and other derivitives - essentially underwriting those assets with pretty much every major financial institution. This interwovenness is what is giving the gov't angst - a metldown here (rather than the P&C world) has systemic effects across the financial world. Collapse would likely destabilize many, many major institutions.

No word yet on what a bailout might look like.