Aig Bailout & Stakeholder Analysis
AIG Bailout & Stakeholder Analysis
In September 2008, the American International Group, AIG, the largest insurance company in the United States, suffered from the bad debts incurred insuring mortgage-backed securities. As a result, within a matter of three months, AIG reported a startling quarterly loss of $61.7 billion, largest in the U.S corporate history. Instead of watching this global insurance giant fall on its keens, the U.S. government has decided to lend a helping hand by bailing out AIG. However, this generosity isn’t without a cost. Seven months and four bailout programs later, the American taxpayers are stuck with a bill for the amount of $182 billion, in return for 79.9% equity stake of the failing company. Soon after the bailout fund was received, the board of directors at AIG announced that the company will continue to reward its senior management and traders with the contractual $165 million bonus, the same group of people that caused the AIG collapse and global credit crisis in the first place.
Personal, I am completely disgusted with this particular decision. How can any of the executives and traders be able to spend a penny from this bonus pool knowing what their action have caused. Just like Cousin Robin, millions had lost their life time savings due to someone else’s greed and irresponsibility. However, at the same time I have no choice but to agree with the government’s decision on bailing out AIG and indirectly looking out for its employees and shareholders. The following is my argument based on the impact from several stakeholders if the government had not done so.
Investors:
The first immediate impact of the AIG bankruptcy will be its investors. Although AIG is widely regarded as world’s No. 1 insurance corporation, many had not realized that AIG is also the world’s largest credit insurer for many major corporations as well as the largest issuers on credit related derivative products such as Credit Default Swap or CDS. During
In September 2008, the American International Group, AIG, the largest insurance company in the United States, suffered from the bad debts incurred insuring mortgage-backed securities. As a result, within a matter of three months, AIG reported a startling quarterly loss of $61.7 billion, largest in the U.S corporate history. Instead of watching this global insurance giant fall on its keens, the U.S. government has decided to lend a helping hand by bailing out AIG. However, this generosity isn’t without a cost. Seven months and four bailout programs later, the American taxpayers are stuck with a bill for the amount of $182 billion, in return for 79.9% equity stake of the failing company. Soon after the bailout fund was received, the board of directors at AIG announced that the company will continue to reward its senior management and traders with the contractual $165 million bonus, the same group of people that caused the AIG collapse and global credit crisis in the first place.
Personal, I am completely disgusted with this particular decision. How can any of the executives and traders be able to spend a penny from this bonus pool knowing what their action have caused. Just like Cousin Robin, millions had lost their life time savings due to someone else’s greed and irresponsibility. However, at the same time I have no choice but to agree with the government’s decision on bailing out AIG and indirectly looking out for its employees and shareholders. The following is my argument based on the impact from several stakeholders if the government had not done so.
Investors:
The first immediate impact of the AIG bankruptcy will be its investors. Although AIG is widely regarded as world’s No. 1 insurance corporation, many had not realized that AIG is also the world’s largest credit insurer for many major corporations as well as the largest issuers on credit related derivative products such as Credit Default Swap or CDS. During