American International Group Inc (AIG.N) has so far borrowed $70.3 billion under a U.S. government bailout loan even as regulators keep a close eye on how the insurer is using those funds, The Wall Street Journal said.

The U.S. government had originally said it would loan AIG, once the world's biggest insurer, $85 billion, but increased that to $122.8 billion on Wednesday as the company races to sell assets to pay off the loan before the credit turmoil makes buyers harder to come by.

Since the rescue plan was announced, a team from the Federal Reserve Bank of New York and outside experts hired by the Fed have been trying to assess how money is flowing within and from the company, the Journal said.

The Fed also has been sending personnel to AIG divisions and Chief Executive Edward Liddy and a top bank supervision executive from the Fed talk many times a day, the paper said.

The lion's share of the Fed's original loan was toward providing collateral to AIG's trading partners on credit default swaps, and covering losses in its securities lending program, the paper added.

AIG and the New York Fed could not be immediately reached for comment by Reuters.