A new American financial conglomerate has emerged virtually overnight, and if it should run into trouble, Washington won't be able to help.

Because it is Washington.

Adding to its portfolio of mortgage-finance companies, the government has taken control of American International Group, the world's largest insurance company by assets.

The Federal Reserve is lending $85 billion in return for a 79.9 percent stake in the company. The two-year loan will carry an interest rate of Libor plus 8.5 percentage points, a punitive rate. (Libor, the London Interbank Offered Rate, is a common short-term lending benchmark.)

It is a revolutionary, unprecedented move by the federal government, and it starkly illustrates the depth and breadth of a credit crisis that has shaken the global financial system to its core. It is a move that will certainly provoke much political debate, especially in an election year.

For one, the U.S. government does not regulate insurance companies. It is left to the states, creating a big gaping hole in the federal financial regulatory framework, a hole that the industry has fought to keep for years. Indeed, it is not immediately clear that the Fed has access to the collateral backing the loan to the parent company, as the states would have first claim to the assets of the insurance subsidiaries they regulate.

The Fed, as it did in the case of Bear Stearns, justified its intervention by a clause in its charter that allows it to take such actions in "unusual and exigent circumstances."

And the A.I.G. takeover is very different than the rescues of Bear Stearns, Fannie Mae, and Freddie Mac. Bear was a loan, and Fannie and Freddie were arguably quasi-government creatures anyway. But in A.I.G., taxpayers are buying a stake in a company with a $1 trillion balance sheet, a global presence, and all sorts of unknown risks.

We are in the era of the Paulson Doctrine, says Roger Ehrenberg on his Information Arbitrage blog.

"In the short run, the Paulson Doctrine helps the markets. It creates the liquidity-driven optionality only available through the U.S. Government's philanthropy, protecting against wholesale liquidations that could further depress asset prices and start a daisy chain of events leading to a radical marking down of assets globally."

Is this a good thing? For the short term, yes, he says, if only because the U.S. is the debtor to the world and needs to persuade China and Japan and others to keep buying our dollar-denominated debt.

For while the A.I.G. intervention will be criticized as a bailout for the rich, it may be primarily a move to calm the rich and powerful overseas. And the reaction from foreign markets and investors has been generally positive today.

A collapse of the insurance company could have created financial instability throughout the world and would have driven foreign investors away from the U.S., deepening the crisis here.

Nearly every big bank in the world has some degree of exposure to A.I.G. In its sale of credit default swaps, the insurer is a counterparty to countless banks, hedge funds, and other financial institutions.

An A.I.G. bankruptcy could have cost the financial industry $180 billion, estimated RBC Capital Markets, Bloomberg News reported. The company provided insurance on more than $441 billion of fixed-income investments held by the world's biggest institutions, including $57.8 billion in securities tied to subprime mortgages.

Indeed, the Fed said in its statement about the intervention that it determined that "in current circumstances, a disorderly failure of A.I.G. could add to already significant levels of financial market fragility and lead to substantially higher borrowing costs, reduced household wealth, and materially weaker economic performance."

A.I.G. said, "We believe the loan, which is backed by profitable, well-capitalized operating subsidiaries with substantial value, will protect all A.I.G. policyholders, address rating-agency concerns and give A.I.G. the time necessary to conduct asset sales on an orderly basis."

A.I.G.'s chief executive, Robert Willumstad, the former Citigroup executive who only recently replaced Martin Sullivan, will himself be ousted and replaced by Edward Liddy, a former C.E.O. of Allstate.

This is a short-term intervention. The credit crisis is strangling the economy now, and action is needed. Two years from now, the housing market may start showing signs of life, and taxpayers could profit from the government's equity stake.

Still, it is a gamble. Taxpayers can only hope that Washington will be better as a financial manager than it has been as a watchdog.