WASHINGTON – It’s a $150 billion gamble. That’s the size of the newly enlarged financial lifeline the U.S. government has thrown tottering insurance giant American International Group.

The government added $40 billing Monday to an aid package that’s gradually grown since it began as an $85 billion loan in September.

The big question: Will the bailout be enough to stabilize the firm?

Here are some questions and answers about the rescue plan.

Didn’t AIG already get a bailout from the government?

Yes. Back on Sept. 16, the Federal Reserve initially provided AIG with a $85 billion loan, in return for a nearly 80 percent ownership stake. On Oct. 8, the Fed followed up with another, $37.8 billion loan.

Then, on Oct. 31, AIG was allowed to access another $20.9 billion through the Fed’s “commercial paper” program. That’s where the Fed buys mounds of short-term debt from the companies, which often used the money for crucial day-to-day expenses, such as payroll and supplies.

So, the original bailout plan didn’t work?

Even with the original $85 billion lifeline, AIG continued to have problems as the country’s overall financial and credit conditions worsened. The company was burning through cash and was saddled with risky mortgage-related securities that had fallen sharply in value and continued to deteriorate after the initial bailout.

AIG reported a massive third-quarter hit Monday. It lost $24.47 billion, or $9.05 per share, compaared with a profit of $3.09 billion, or $1.19 per share, a year ago. Revenue declined 97 percent to $898 million from $29.84 billion in the third quarter of 2007.

“This is the largest quarterly loss we’ve ever reported,” Chief Financial Officer David Herzog told investors on a conference call.

What’s different about the new bailout?

All told, the new bailout is bigger – providing more than $150 billion to AIG.

In a new twist, the Treasury Department is now stepping in with $40 billion, which is coming from the $700 billion financial bailout package enacted last month. It marked the first time any of that bailout money has gone to any company other than a bank.

Monday’s restructuring also provides AIG with easier terms on the original Fed loan.

The new package reduces the interest rate AIG will pay and extends the loan term to five years from two, reducing the need for AIG to sell off business lines and other assets at fire-sale prices to repay the government.

In addition, the new arrangement replaced the second $37.8 billion Fed loan to AIG with a $52.5 billion aid package. Under that part of the plan, the Fed will fund the purchase of both residential mortgage-backed securities from AIG’s portfolio and collateralized debt obligations, which are complex financial instruments that combine slices of debt.

By removing these troubled assets from AIG’s balance sheet, the bailout should take stress off the company, giving it more breathing room and helping to prevent future losses, Fed officials said. The Fed doesn’t believe it will suffer losses because it is hopeful the market for such distressed investments will recover as the economy and financial markets eventually rebound.

Why is it important to keep AIG afloat?

AIG is a global colossus, with operations in more than 130 countries. It is so interconnected with other financial firms that its problems have a jolting ripple effect both in the United States and abroad.

AIG was pushed to the brink of bankruptcy in September when its credit rating was downgraded and it could not post the collateral for which it was obligated under the “credit default swap” contracts it had issued. Credit default swaps are a type of corporate debt insurance.

The Fed raced to the rescue at that time to prevent AIG’s failure, which could have triggered billions of dollars in losses at other banks and financial firms that bought these swaps from AIG – sending them into failure as well.