NEW YORK CITY, N.Y. -- Amid Wall Street's failures is state intervention.

"I am deeply concerned about the fiscal crisis that has engulfed our financial markets," said Governor David Paterson.

For two collapsed firms, Merrill Lynch and Lehman Brothers, there wasn't anything left but help employees out of work. But Governor Paterson did throw a life jacket to the ailing Insurance giant, AIG, also reeling from risky bets traced to the housing and credit markets.

As the firm moved dangerously close to a credit rating downgrade, the Democrat directed a one-time lifting of state regulations, allowing the company to access as much as $20 billion from its own vast subsidiaries. It's not a taxpayer bailout and officials insist policy holders are protected.

The announcement jerked back AIG's plummeting stock price, although its close was about a fifteenth of its year-long high and it came shortly before the federal government asked two titan banks to arrange a loan for AIG of about $70 billion.

"AIG for a long time was the largest insurer in the united states by market value it has thousands of customers globally, it has a trillion dollars in assets, it's a massive, massive company and to the extent that AIG tumbles it will have a huge ripple effect across the entire economy,” said Dan Wilchins, Reuters Finance Team Editor-in-Charge.

And also on already struggling state finances. The New York-based firm employs 8,500 statewide.

Last summer the governor called back the state legislature to trim this year's budget but now the troubles on Wall Street have the governor worrying that future deficits will be even worse than projected.

His call for $600 million in one year cuts fell short, it's a safe bet the teetering financial sector will demand larger sacrifices next time.