The once admired company known as AIG has become a black hole--losing more than $100 billion in 2008, vaporizing $150+ billion of taxpayer bailout money, and now threatening to suck in all the wealth in the western world.

(Okay, we exaggerate: A reader assures us that the loss on AIG credit default swaps can't exceed $440 billion. Of course, now all of AIG's other assets are plummeting in value, too, and it has a $1 trillion of them).

Even now, AIG and the government are in talks to fork over more taxpayer cash and ease the burden of AIG's bailout interest payments (Surprise! All those priceless divisions that AIG promised to sell last fall to pay off the debts can't be sold).

One planned solution is for AIG to sign over to the taxpayer stakes in the plummeting Asian subsidiaries that AIG can't sell. The Treasury will no doubt accept AIG's argument that these assets are worth the same as they were in 2007 (preposterous), and, thus, the AIG bailout cost will soar well over $200 billion. Worse, the government will then own and operate Asian insurance subsidiaries that it can't sell, either.

Sickening. But here's worse news: AIG is only the beginning.

Until we bite the bullet and do what we should have done in the beginning--make shareholders and bondholders of insolvent companies pay for their own stupid mistakes--our running bailout tab (and ownership of the economy) will continue to soar.

Citigroup. Bank of America. Any number of smaller insurance companies, banks, car companies, pension funds.

They all need saving. They will all create "systemic" problems if they aren't saved. And they will all manage to persuade us, in the heat and fear of the moment, that if they can just have another, say, $30 billion, they'll quickly return to profitability and make us money (it's an investment, after all. Not a bailout).

The more money we put in, the less willing we will be to stop putting money in, because the systemic risk will remain and we'll have that much more to lose.

Well, enough.

AIG has $225 billion of long-term debt (as of Sept 30). Let's start by converting 80% of that to equity. Then we can change the terms of all the CDS and other contracts that AIG has to come up with collateral for (this would happen in bankruptcy, anyway). That should buy us some time.

And while we're waiting to see what else we need to do with AIG, we can do the same at Bank of America and Citigroup: Convert all the preferred stock and some of the debt to equity, improving those banks' ever-deteriorating capital ratios.

Will this have a devastating impact on everyone who owns all that debt? Well, they'll certainly say so. No one likes having something they thought was backed by the full faith and credit of the US government actually turn out to be what it said it was: a risky investment.

But they'll get over it. They always do. And they might even be more careful next time (welcome to the real world).

Will such moves end civilization as we know it? Always a possibility.

But here's the good news:

If civilization as we know it ends, it will take AIG down, too.