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    The US government launched a massive bailout of American International Group (AIG) in 2008 during the financial crisis. [1] The Federal Reserve provided $182 billion in total aid to AIG to prevent its collapse, using funds from the Troubled Asset Relief Program. [2] AIG's risky investments in mortgage-backed securities and billions in credit default swaps left it vulnerable when the housing market declined. [3] Officials felt they had to rescue AIG to avoid damaging effects on the broader financial system and economy since it was deemed "too big to fail."

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    The downfall of AIG and how it happened.

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    AIG-presentation

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    The US government launched a massive bailout of American International Group (AIG) in 2008 during the financial crisis. [1] The Federal Reserve provided $182 billion in total aid to AIG to prevent its collapse, using funds from the Troubled Asset Relief Program. [2] AIG's risky investments in mortgage-backed securities and billions in credit default swaps left it vulnerable when the housing market declined. [3] Officials felt they had to rescue AIG to avoid damaging effects on the broader financial system and economy since it was deemed "too big to fail."

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    © All Rights Reserved
    Download as PPTX, PDF, TXT or read online from Scribd
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    Download as pptx, pdf, or txt
    21 views11 pages

    AIG Presentation

    Uploaded by

    Hey Jude
    The US government launched a massive bailout of American International Group (AIG) in 2008 during the financial crisis. [1] The Federal Reserve provided $182 billion in total aid to AIG to prevent its collapse, using funds from the Troubled Asset Relief Program. [2] AIG's risky investments in mortgage-backed securities and billions in credit default swaps left it vulnerable when the housing market declined. [3] Officials felt they had to rescue AIG to avoid damaging effects on the broader financial system and economy since it was deemed "too big to fail."

    Copyright:

    © All Rights Reserved
    Download as PPTX, PDF, TXT or read online from Scribd
    Flag for inappropriate content
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    of 11

    Bailout of AIG

    Group Members
    Name ID

    Badrur Rahman Siddiqui 19241139

    Mahdi Mahmud 19241061

    Sanja Kader 19241068

    Ashikur Rahman 19241081

    Md. Nazmul Hasan 18241077

    Md. Muntasir Rahman 18241097

    Samin Yeasar 18241007

    Khairul Hasan Bhuiya Shezan 18241059


    Overview of AIG

    87% of the Fortune 83% of the Forbes 2000 $65.2 billion in 87th largest public company
    Global 500 shareholder equity in
    2017
    Troubled Asset Relief Program

    United States government purchased toxic


    assets and equity from financial institutions

    Increase the liquidity of money markets and


    TARP secondary mortgage markets

    2008 major financial institutions


    experienced severe financial problems

    Treasury Department used $105 billion in TARP


    funds to launch the Capital Purchase Program
    Causes of AIG downfall

    Securities Lending

    Risky Credit Default Swap Not “Money-good”


    AIG securities lending business went
    from less than $30 to $88.4 billion
    AIG’s credit default swaps did not call “The fact that these underlying
    for collateral to be paid in full assets did end up suffering
    AIG did not have enough other liquid
    assets to meet all the redemption substantial losses suggests that this
    AIG had written credit default swaps on requests wasn’t just about liquidity”
    over $500 billion in assets
    Causes of Bailout

    Credit default swaps Too Big to Fail

    AIG's subprime mortgages pushed


    company to the brink of bankruptcy Investment banks that held CDOs
    insured by AIG were at risk of
    stockholders got wind of the situation losing billions

    AIG couldn't sell them before the AIG’s fall would send shockwaves
    swaps came due money markets
    2008: Details of the Bailout

    Sep 16 2008: Federal Nov 10 2008: Fed reduced its Apr 2009, the Treasury
    Reserve provided an $85 $85 billion loan to $60 committed another $29.84
    billion to AIG billion billion

    Oct 8 2008: Federal Reserve Nov 2008: Treasury Department


    Bank of New York agreed to purchased $40 billion in AIG
    lend $37.8 billion preferred

    TOTAL 182
    BILLION AID
    The Bonus Scandal

    President Obama chastised the firm for its March 2009: AIG paid $165 million
    audacity of using borrowed taxpayer money government funds for employee
    bonus incentives

    AIG tried to award $265 million in


    further bonuses
    September 2008: sent its executives on a
    half-million-dollar retreat
    Consequences of Bailout

    AIG reported the largest loss in corporate history, lost


    nearly record $62 billion in the fourth quarter of 2008

    The government and taxpayers made a $22.7 billion profit


    from the AIG bailout.

    AIG agreed to pay $960 million to investors who bought


    AIG shares
    What if AIG failed?

    Letting such a large and interconnected  If AIG went down, it would send shockwaves
    institution fail was not a gamble the government through the already shaky money market
    was willing to take

    The average household in America had to shell If AIG defaulted on its CDS contracts it would
    out around $2000 bring down everyone who bought them as well
    Thank you!

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