AIG

About AIG

AIG received a 182 billion government bailout in September 2008. The insurance giant had sold credit default swaps protecting 441 billion in securities. When Lehman collapsed, the CDS bets went bad. The Federal Reserve created a 85 billion credit facility. The Treasury later used TARP funds. AIG was effectively nationalized, with the government owning 79.9 percent. AIG paid 165 million in bonuses to the financial products division that caused the losses, sparking public outrage. Senator Chuck Grassley suggested AIG executives should resign or commit suicide. The government eventually recovered 205 billion from AIG, earning a 23 billion profit. The AIG bailout was larger than TARP funding for any bank. The case raised questions about moral hazard and the appropriability of rescuing a single insurer.