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Government Involvement in the AIG Problems Continues to Stir the Nation.

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AIG problems have been making headlines the last few days. American International Group (AIG) is an insurance conglomerate and is the largest underwriter in the US.

This company operates out of New York with branches and subsidiaries all over the world.

However, gross malpractices and lack of proper risk management has put the company on the brink of collapse.

The primary problem started when the executives of the company got greedy and decided to insure the mortgage-backed risky securities of banks and other financial institutions.

Unfortunately, most of these risky securities were defaulted because they were securities of the subprime market. So, AIG had to pay billions of dollars in claims.

The company did not have such a huge reserve of cash and also its credit rating was lowered making it difficult to raise more cash.

This gross mismanagement led to the near-collapse situation of AIG.

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Fed Bails Out AIG

In order to solve AIG problems and the consequent financial crisis, the Federal Government decided to bailout the company with taxpayer’s money.

So, the Government initially granted $85 billion for a 80% stake in the company and this amount was later increased to $170 billion.

So, effectively the American public own 80% of AIG now.

Though the company is owned by the public, they rarely know about the workings of the company.

The American public also have no idea how this huge amount of money was spent to resurrect the company because of a lack of accountability.

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Misused Bailout Money

The tax payers money granted by the Government to solve AIG problems was not used in an appropriate way.

In fact, this money was spent lavishly to provide recreation and bonuses to the executives of the company.

All this was supposedly done to retain talent in the company.

Just days after getting the bailout money AIG sent its executives on a British hunting expedition and this trip cost $85,000 for the company.

The former CEO of the company, Sullivan, was paid $5 million and a golden parachute worth $15 million was given to him.

Why should so much be given to a person who is no longer even a part of the company?

The need for such excesses must be questioned so that the company and its executives behave in a more responsible manner in the future.

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The Goverments Role in Collapse of AIG

The Government is also partially responsible for AIG problems and the resulting consequences facing the entire nation today.

They must have exercised better control over the workings and accounts of the company so that such lavish spending of tax payers money would not have occurred.

Large-scale bribery in Washington, a callous attitude towards tax payers money and the presence of lobbyists have been the primary reason for this negligence on the part of the Government.

Even the Government appointed CEO, Edward Libby, justified the spending instead of opposing it.

This is the level of commitment given to the hard earned money of millions of Americans.

These corporate giants must be made to account for the taxpayers money that is keeping them afloat.

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