Was it corruption that brought down AIG ?
No it was not. AIG was brought down by excessive holdings of derivative securities, primarily those known as Credit Default Swaps. It is an over simplification, but one could say Credit Default Swaps are a form of insurance against loss due to defaulted debt, i.e. mortgage foreclosures. AIG was on the wrong side of a monumental insurance bet.
Was there corruption? Yes, but it was not responsible for the fall. It came after the fall. It came in an effort to save the company. Credit Default Swaps do not trade in a high volume auction market like common stock. There is no widely recognized value for these esoteric instruments. Nevertheless, there was no doubt the real value had plunged to somewhere near zero. Sarbanes -Oxley required such securities be “marked to market”, i.e. reflect the loss on the books. AIG did not do so. AIG may not have been squeaky clean but they certainly were not Enron corrupt.
If it wasn’t corruption that brought them down, what was it?
Bad Risk Management. A mortal sin for an insurance company.
Was taxpayer money required to bail out AIG ?
No, not one red cent. Polls at the time revealed that the public recognized this but our politicians did not. In a properly functioning free market system Darwinism prevails. Governments do not infuse capital into companies that engage in failing practices. That is not free market, it’s’s intervention.
Indeed, taxpayer money was used but it was not required. It was a choice made by elected representatives who, once again, failed to represent our interests.
RANDOM THOTS 