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AIG’s Culture

AIG’s Culture. Maurice “Hank” Greenberg Responsible for new innovative products Used his contacts to advance AIG Lobbied for laws/rules that benefited AIG

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AIG’s Culture

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  1. AIG’s Culture • Maurice “Hank” Greenberg • Responsible for new innovative products • Used his contacts to advance AIG • Lobbied for laws/rules that benefited AIG • Investigated by SEC for its “finite insurance” deals and rumors he was involved in bogus reinsurance transactions to fraudulently boost AIG’s reserves

  2. AIG’s Demise • Credit Default Swaps(CDSs) • Insurance contracts became worthless • Bailed out by Government-ended up owning 79.9% of AIG • AIG Financial Products was source of companies woes(hedge funds) • Derivatives

  3. AIG’s Demise • Collateralized Debt Obligations (CDOs) backed by mortgages • AIG backed more than $440 billion worth of obligations • CDOs and CDSs used recklessly • Failed to assess systematic risk of counterparties not measuring their own exposure

  4. AIG’s Demise • AIG Lacked Transparency • Auditors excluded from conversations that concerned the evaluation of derivatives • AIG provided incentives to take risks • AIGs culture focused on rewards, placed little responsibility on executives who lacked good decision making skills • $40 billion in losses in 2008

  5. Bailout • Received more than $152 billion in federal rescue funds • Excessive rewards to keep top talent • Bailed out to prevent failure of some of worlds largest banks • Failed to take into account real-world market risks • Did not understand the complexity of the financial products it was selling

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