The figures are almost too big to imagine, but here's a link to a superb article in the New York Times which explains the mess the US insurance giant AIG has got itself into. Bears of little brain, ie me, will want to read it twice; it explains in relatively simple terms how we ended up where we are.
But here's the paragraph that chilled my blood:
Here’s what is most infuriating: Here we are now, fully aware of how these scams worked. Yet for all practical purposes, the government has to keep them going. Indeed, that may be the single most important reason it can’t let A.I.G. fail. If the company defaulted, hundreds of billions of dollars’ worth of credit-default swaps would “blow up,” and all those European banks whose toxic assets are supposedly insured by A.I.G. would suddenly be sitting on immense losses. Their already shaky capital structures would be destroyed. A.I.G. helped create the illusion of regulatory capital with its swaps, and now the government has to actually back up those contracts with taxpayer money to keep the banks from collapsing. It would be funny if it weren’t so awful.
I shouldn't look at the internet, it gives me bad dreams.