Nevertheless debtor of bond places cash due to the fact collateral with the lender, in this case AIG
Revisiting the fresh new AIG Bailout
For my situation, the newest bailout of AIG insurer back to usually stood from the other bailouts around that time. If bailing away highest financial institutions was a required step or perhaps not, no less than it absolutely was visible as to the reasons financial institutions was in some trouble: housing rates got dropped greatly, and much more someone than just requested was in fact neglecting to pay off their mortgage loans. Similarly, it actually was visible the clear shed during the property rates you certainly will lead to severe trouble having Federal national mortgage association and you can Freddie Mac, both greatest federal agencies that have been to order mortgages, bundling all of them to each other, and then reselling all of them. The new financial difficulties from GM and you will Chrysler produced some experience, too: they were currently impeded by the higher costs, declining market share, and you will tough competition while auto transformation folded inside Great Recession, they certainly were hemorrhaging money. But what caused the insurance carrier for example AIG to get rid of $100 mil within the 2008? Just how did an insurance coverage team getting entangled inside an urgent situation rooted inside the falling family pricing and you can subprime mortgage loans?
Robert McDonald and you will Anna Paulson give an explanation for financial image about the fresh views from inside the “AIG during the Hindsight” about Springtime 2015 dilemma of new Record out of Economic Point of views. Read more
