Qualified like too big to fail, AIG (American International Group) has been rescued today by receiving $85 billion from the Federal Reserve in exchange of 79.9% of its capital.
Even if the name is american AIG is one of the biggest insurance company all over the world. It represents 100 000 employes and over $1 trillion in assets. AIG was assuring from bank to individuals and a bankrupt of the group would have been dramatic for the whole economy.
After the bankrupt of Lehman Brothers we can wonder why did the Federal Reserve decide to rescue AIG ? In an interview made by the french newspaper "l'expansion", Jean-Charles Rochet (economics and mathematics teacher in the Toulouse Sciences Economiques) explain that the two decisions were already taken when Lehman Brothers crashed on monday. The group was holding a too important place in the financials markets because of its credit insurances. When they announced to not help the first one they already knew than AIG will be rescued.
We knew that the credit crunch would affect directly the mortgage companies and the banks but we forgot that the insurance companies are also exposed. In the future what impact on the insurance field will have the credit crisis ?
Related links:
http://ir.aigcorporate.com/phoenix.zhtml?c=76115&p=irol-newsArticle&ID=1197918&highlight=
http://bloomberg.com/apps/news?pid=20601087&sid=amrQtoxTGmgU&refer=home
