Bush White House gives one last gift to Wall Street

Well maybe not the last. After all, there are still 71 days to go before the inauguration.

But late Sunday, George W. Bush's administration scrapped its original $123-billion bailout of American International Group (AIG) and offered a new one, for $170 billion, that extends the loan from two years to five. The deal is part of the $700-billion stash that Congress passed last month.

So far this morning, Wall Street seems to like the news. As for AIG, its CEO Edward Liddy said the new plan "is a significant step forward" that will help AIG divest itself of bad business loans. Tapped to lead the company amid its turmoil five weeks ago, Liddy also said it feels more like five years.

As the Wall Street Journal reported this morning, the new, more robust bailout of AIG is likely to spark a political backlash.

For one thing, Democrats have signaled that under President-elect Barack Obama's administration, the Treasury will use the $700-billion bailout money differently. If there's any left.

For another, Democrats are likely to be enraged that the U.S. government is bailing out Wall Street -- again -- while the Big Three auto makers are nearing the precipice. The White House has been resisting a direct bailout of an industry, preferring to dole out the money to the financial sector and let those traditional gatekeepers of the nation's money supply do their thing.

-- Johanna Neuman

Photo: Stan Honda / Agence France-Presse / Getty Images