The Wall Street Journal finally got around to doing a story on “the other part of AIG,” that being the one that manged to throw cash and assets out the window without touching a Credit Default Swap:

Accounts of AIG’s near collapse have largely focused on soured trades entered into by the company’s Financial Products division. But a close look at the 2,000-employee AIG Investments unit shows how this part of the conglomerate made gambles that helped cripple the firm.
In running the securities-lending business, AIG Investments bought tens of billions of dollars in subprime-mortgage bonds. That turned out to be a riskier approach than some rivals’, who parked cash from securities lending mostly in low-risk or short-term investments such as Treasury securities and commercial paper, according to analysts.

And how would you like to be these guys from AIG Investments right now?

In December 2005, executives from AIG Investments proposed to AIG’s credit-risk managers a set of guidelines for the securities-lending business. One was to invest up to 75% of the cash collateral it received in “asset-backed securities,” according to people familiar with the matter.

Oops.
An AIG Unit’s Quest to Juice Profit [The Wall Street Journal]