The U.S. government is boosting its investment in embattled insurer American International Group Inc., providing the firm with an additional $30 billion in capital but also exposing U.S. taxpayers to additional risk.

The Treasury Department and Federal Reserve announced the third version of the government's bailout of the firm in a joint statement made in conjunction with the firm's announcement of a fourth-quarter loss of $61.7 billion. In addition to providing up to $30 billion in additional capital to AIG in return for preferred stock, the Treasury Department said it would convert its existing $40 billion of preferred shares into new preferred shares that more closely resemble common stock.

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