Table of Contents
What would happen if AIG collapsed?
Money market funds, generally seen as safe investments for the individual investor, were also at risk since many had invested in AIG bonds. If AIG went down, it would send shockwaves through the already shaky money markets as millions lost money in investments that were supposed to be safe.
Why did AIG fail in 2008?
AIG was accruing unpaid debts—collateral it owed its credit default swap partners, but did not have to hand over due to the agreements’ collateral provisions. But when AIG’s credit rating was lowered, those collateral provisions kicked in—and AIG suddenly owed its counterparties a great deal of money.
What happened to the US economy in 2008?
The crisis rapidly spread into a global economic shock, resulting in several bank failures. Economies worldwide slowed during this period since credit tightened and international trade declined. Housing markets suffered and unemployment soared, resulting in evictions and foreclosures. Several businesses failed.
What caused AIG to fail?
In January 2011, the Financial Crisis Inquiry Commission issued one of many critical governmental reports, deciding that AIG failed and was rescued by the government primarily because its enormous sales of credit default swaps were made without putting up the initial collateral, setting aside capital reserves, or …
Why did the government bail out AIG 2008?
The AIG Bailout The AIG 2008 crisis was massive. The insurance company collapsed and had to be bailed out by the government. The $13 billion that AIG had lost to Goldman Sachs betting on subprime mortgage bonds was fully covered by the government.
What happened to AIG?
AIG was operating in the shadows of the financial world, where the regulatory spotlight didn’t shine. AIG began insuring Goldman Sachs’ and Deutsche Bank’s subprime mortgage bonds as quickly as they could get their hands on them.
How did AIG aid banks in the 2008 financial crisis?
We’ll cover how AIG insurance company (American International Group) aided banks in the events that would lead to the 2008 financial crisis and the results of the 2008 AIG bailout. In early 2006, banker Greg Lippmann went to investor Steve Eisman’s office with a proposal to bet against the subprime mortgage market.
What happened to AIG after the Fed bailed out Bear Stearns?
It was six months after the Fed bailed out Bear Stearns. Later that week, Paulson and Bernanke asked Congress for a $700 billion bailout to rescue all other banks. In October 2008, the Fed hired Edward Liddy as CEO and Chairman. His job was to break up AIG and sell off the pieces to repay the loan.