Guaranteed investment contracts are typically issued by life insurance companies qualified for favorable tax status under the Internal Revenue Code (for example, 401(k) plans).
GICs are considered safe vehicles since most insurance companies offering them are rated in the AA to AAA range.
However, when life insurance companies started failing, people began to lose their faith in GICs as a product.
For example, Executive Life Insurance Company had some junk bond problems in 1990, and people started redeeming their GICs.
The NY Times reported that some of the government money (at least 9 billion dollars) was used to pay out on "Guaranteed Investment Agreement" contracts that AIG had sold to investors.