Did AIG Play a Role in the Financial Crisis?
AIG’s Role during the Financial Crisis
Despite incurring hard losses during the September 11 bombing, AIG continued to stay afloat, posting an income of $5.36 billion, which was just a marginal decline from the $5.64 billion that they declared the previous year. However, the company began suffering losses when AIG accumulated house mortgages from hundreds of people who applied for them during the onslaught of the American financial crisis. Several banks from their overseas partners brought these mortgages, which were backed up by the government. AIG offered credit default insurance, which meant that if the mortgages were not paid, then AIG should pay for it. Most of these international banks and international businesses were partners of AIG.
Thinking that the economy would turn, AIG continued this policy, which had worked for them all the years that they applied the credit default insurance policy. However, there was an unexpected draft of increasing unemployment, meaning that the people were not able to pay back their mortgages. So the different overseas banks and partners of the mortgage contracts began to claim their insurance. But AIG was not able to pay back all the mortgage loans. Since AIG was one of the leading insurance companies, which is well-known, the US government decided to step in and help the company pay back the mortgage contracts that were brought by the overseas banks and companies. The amount was so big that it staggered the US budget, taking a toll on the economy.
Who is AIG?
The American International Group, Inc, or more popularly known as AIG, is a leading international insurance company, which operates in more than one hundred thirty (130) countries and jurisdictions worldwide. Its combined revenues make AIG the largest United States-based international insurance agencies in the world. AIG focuses on four major, distinct markets: life insurance and retirement services, financial services, general insurance, and asset management. It is the lead underwriter for commercial and a mix of products from financial services, capital markets and consumer finance, aircraft and equipment leasing, and also insurance finance business. They also offer services like asset management and institutional management, including broker services and private banking among others. AIG stock is listed, not only under the New York Stock Exchange, but also in Tokyo, Paris, Switzerland, and London.