AIG Failure TARP Bailout
The Government Missed The Point of AIG.The following is a passage from a document published by the UNITED STATES DEPARTMENT OF THE TREASURY – OFFICE OF FINANCIAL STABILITY Troubled Asset Relief Program:
Two Year Retrospective. This is better known as the TARP program. Yes, I did read this to see the Feds take on the crisis. Approximately 9 pages were dedicated to the AIG Bailout. I am going to include the passage and then comment on it in the next post.
At the time, AIG was the largest provider of conventional insurance in the world, with approximately 75 million individual and corporate customers in over 130 countries. AIG’s assets exceeded $1 trillion. It was significantly larger than Lehman Brothers. It insured 180,000 businesses and other entities employing over 100 million people in the U.S. It was a large issuer of commercial paper and the second largest holder of U.S. municipal bonds. AIG’s parent holding company, which was largely unregulated, engaged in financial activities that strayed well beyond the business of life insurance and property and casualty insurance. Its financial products unit was a significant participant in some of the newest, riskiest, and most complex parts of the financial system.
In the chaotic environment of September 2008, the Federal Reserve and Treasury concluded that AIG’s failure could be catastrophic. Among other things, if AIG had failed, the crisis would have almost certainly spread to the entire insurance industry, and its failure would have directly affected the savings of millions of Americans in ways that Lehman’s failure did not. Therefore, the government took action to protect the financial system.