Bailout Bank Bio: AIG

Mar 3, 2009 | 6 min read | Print Article

UPDATE: March 4, 2009.

After reporting a $61.7 billion quarterly loss – the biggest single quarter loss ever – in early March AIG asked for and was granted an additional $30 billion from the federal government. The following day Federal Reserve Chairman Ben Bernanke expressed his anger at the way the company had exploited loopholes to get into its current financial situation. According to Bernanke, “A.I.G. exploited a huge gap in the regulatory system. There was no oversight of the financial products division. This was a hedge fund, basically, that was attached to a large and stable insurance company.” And this quasi-hedge fund, Mr. Bernanke went on, to nobody’s surprise, made irresponsible bets and took huge losses.

American International Group, Inc. (AIG) is a holding company which, through its subsidiaries, is engaged in a range of insurance and insurance-related activities in the United States and abroad. AIG’s primary activities include both General Insurance and Life Insurance & Retirement Services operations. Other significant activities include Financial Services and Asset Management. AIG’s major product and service groupings are General Insurance, Life Insurance & Retirement Services, Financial Services and Asset Management. Through these operating segments, AIG provides insurance, financial and investment products and services to both businesses and individuals in more than 130 countries and jurisdictions. In September 2008, AIG sold its 50% stake in London City airport. In December 2008, AIG’s United States life insurance companies sold its residential mortgage-backed securities portfolio to Maiden Lane II LLC. The company was founded in 1967 and is based in New York, New York. According to Fortune 500’s annual list, AIG was the 13^th largest of all corporations in America in 2008, and was the 2^nd largest among property and casualty insurance companies that year.

In late November 2008, AIG announced its participation in the Treasury Department’s Troubled Assets Relief Program (TARP). Under the program AIG received $40 billion from Treasury in exchange for preferred stock and warrants. Only Bank of America and Citigroup have received more money from TARP.

A recent analysis by the group tasked with overseeing the use of TARP funds, the Congressional Oversight Panel (COP), concludes that AIG received much more in federal government support than the initial $40 billion infusion. According to the report (.pdf – table, p. 7), the government received AIG assets worth only $14.8 billion – a 63 percent subsidy based on the government’s $40 billion payment to the company. Separately, AIG received $110 billion in support from the Federal Reserve Bank of New York.

Recently the company withdrew as a member of the U.S. Climate Action Partnership, a group pushing for implementation of a cap and trade system to reduce greenhouse gas emissions. Critics said the company should not be using taxpayer money to advocate public policy. The company also will let expire its sponsorship of British soccer powerhouse Manchester United. Under the deal, AIG reportedly paid about $19 million per season to have its logo on the team’s jersey.

Paper Cuts in the Discretionary Budget

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Bailout Bank Bio: American International Group (AIG)


Federal Equity Investment	$85 billion (Loan, September 2008) $40 billion (November 2008) $30 Billion (March 2, 2009)
Total Revenue	$110.064 billion (2007) $11.10 billion (2008)
Net Income (Loss)	$6.2 billion (2007) $(99.29 billion) (2008)
Number of Employees	116,000
Corporate Headquarters	New York, New York
Business Sector	Insurance
Officers and Directors	Liddy, Edward, Chairman of the Board, Chief Executive Officer Other officers and directors
Corporate Website	http://www.aigcorporate.com
Executive Compensation	American International Group (AIG)