What AIG Did

What AIG Did

As an insurance company AIG underwrote, and sold, a type of insurance called Credit Default Swaps. Credit Default Swaps essentially were a type of hedge against the risk of Collateralized Debt Obligations failing to produce a profit for those investing in them.

What was wrong with what AIG Did

AIG had no prior experience underwriting Credit Default Swaps, and it improperly assessed the level of risk inherent in CDOs. By underwriting insurance for such high risk bonds (CDOs are a type of bond), and in failing to secure adequate reserves to back that risk it put itself, all those who were insured by it, and their stockholders in financial peril. In essence AIG was driven by short term greed, and absfucated its fiduciary responsibilities.

In short AIG operated a Ponzi scheme which has, and will cost the taxpayers hundreds of billions of dollars to save it from failing.

What Should Happen To AIG

AIG should be saved, but only for the short run. It then needs to be broken up, and sold off. Criminal investigations, both at the State, and Federal level need to be launched to determine who broke which laws, and when. As many AIG executives responsible should be indicted as possible.