September 13, 2008 through March 2, 2009
American International Group, Inc. (“AIG”) was one of the largest financial conglomerates in the world, operating in 130 countries, with extensive operations in insurance, asset management, real estate, consumer finance, aircraft leasing and other areas of commercial finance and financial services. AIG had approximately $1.2 trillion of assets on its balance sheet, and another $2.7 trillion of exposures through derivatives and other obligations of its AIG Financial Products (“FP”) unit, against $78 billion of GAAP equity. As problems in residential mortgage and other credit markets became more severe during 2008, AIG faced mounting concerns, including rating downgrades, collateral calls emanating from the derivatives contracts at FP and cash needs arising from AIG’s securities lending portfolio. Market conditions reached industry crisis levels by the weekend of September 13-14, 2008. Under extreme pressure that weekend, Merrill Lynch agreed to sell itself to Bank of America, and Lehman Brothers filed for bankruptcy protection. With many counterparties refusing to trade with AIG, and much of its capital trapped for the moment in regulated subsidiaries, AIG had virtually exhausted cash available to it at the parent company level by Tuesday, September 16, 2008.
Because of AIG’s systemic importance to the global economy, the Federal Reserve Bank of New York (“FRBNY”) provided immediate liquidity to AIG under an $85 billion, two-year emergency rescue loan facility on September 16, 2008. This measure helped AIG avoid imminent collapse, but otherwise proved temporary. Assisted by Blackstone as sole global coordinator of its restructuring and divestiture program, AIG continued to work with representatives of the FRBNY and the US Treasury to improve its capital structure and liquidity thereafter, ultimately receiving a total of $182.3 billion of assistance under the plans announced by March 2, 2009.
In September 2009, the Government Accountability Office reported that AIG’s situation had stabilized, although its ability to restructure its businesses and repay the government remained unclear.
The government provided assistance to AIG with the intent of minimizing the systemic risk to the global economy posed by a potential AIG failure. AIG set forth a long-term plan designed to maximize the value of AIG businesses for the benefit of all stakeholders. While it expects this process to take several years, AIG believes that disaggregating the businesses and separating them from issues at the holding company will benefit stakeholders – including taxpayers – by allowing AIG to create stronger, focused and more valuable businesses.