The Controversies Over the AIG's Collapse

27 Pages Posted: 18 Jul 2009 Last revised: 11 Mar 2011

See all articles by Anelize Slomp Aguiar

Anelize Slomp Aguiar

New York University (NYU); University of Toronto

Date Written: July 1, 2009

Abstract

Prior to the 2008 financial crisis, American International Group Inc. (AIG) was the major insurance company in the world. However, due to several derivative transactions not related to its core business, AIG collapsed last September. In order to stabilize the economy and to prevent systemic risk, the U.S. Government gave AIG a financial aid of approximately $180 billion under the Troubled Asset Relief Program (TARP), which was only approved by the U.S. Congress after a long debate. The AIG’s bailout was again on the spotlight when its Board of Directors decided to pay $165 million in retention bonus to its employees last March.

In this paper I will explain all those controversy issues. In Section 1, I will contextualize the problem, recapitulating the financial crisis of 2008. In Section 2, I will describe the transactions that lead to AIG’s collapse. In Section 3, I will explain what the U.S. Government is doing to stabilize the company and, consequently, the financial system as a whole. In Section 4, I will present the U.S. Government’s opinion regarding the bonuses payments and the company’s defensive arguments. In my conclusion, I will summarize all sections stating my personal opinion.

Suggested Citation

Aguiar, Anelize Slomp, The Controversies Over the AIG's Collapse (July 1, 2009). Available at SSRN: https://ssrn.com/abstract=1435710 or http://dx.doi.org/10.2139/ssrn.1435710

Anelize Slomp Aguiar (Contact Author)

New York University (NYU) ( email )

Bobst Library, E-resource Acquisitions
20 Cooper Square 3rd Floor
New York, NY 10003-711
United States

University of Toronto ( email )

Toronto, Ontario M5S 3G8
Canada

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