AIG’s Culture Maurice “Hank” Greenberg Responsible for new innovative products Used his contacts to advance AIG Lobbied for laws/rules that benefited AIG.

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Presentation transcript:

AIG’s Culture Maurice “Hank” Greenberg Responsible for new innovative products Used his contacts to advance AIG Lobbied for laws/rules that benefited AIG Investigated by SEC for its “finite insurance” deals and rumors he was involved in bogus reinsurance transactions to fraudulently boost AIG’s reserves

AIG’s Demise Credit Default Swaps(CDSs) Insurance contracts became worthless Bailed out by Government-ended up owning 79.9% of AIG AIG Financial Products was source of companies woes(hedge funds) Derivatives

AIG’s Demise Collateralized Debt Obligations (CDOs) backed by mortgages AIG backed more than $440 billion worth of obligations CDOs and CDSs used recklessly Failed to assess systematic risk of counterparties not measuring their own exposure

AIG’s Demise AIG Lacked Transparency Auditors excluded from conversations that concerned the evaluation of derivatives AIG provided incentives to take risks AIGs culture focused on rewards, placed little responsibility on executives who lacked good decision making skills $40 billion in losses in 2008

Bailout Received more than $152 billion in federal rescue funds Excessive rewards to keep top talent Bailed out to prevent failure of some of worlds largest banks Failed to take into account real-world market risks Did not understand the complexity of the financial products it was selling