This is 2 of 3 in our AIG Series. Check out AIG on the Brink: Was a Bailout Necessary to Save the Financial System? for the first article.
In September 2008, AIG was on the brink of failing as an institution and running out of liquidity. The company, particularly its financial products division, was on the wrong end of a number of derivative contracts that required collateral to be posted to its counterparties. As panic spread throughout the financial system, not only were its counterparties demanding collateral and payments on credit default swaps and other contracts but its investors were recognizing the impending doom the company was facing as well. As a result, the equity and debt of the company was being sold in droves, causing its stock price and bond prices to plummet. Thus, raising funds in order to meet its obligations became virtually impossible... READ MORE