AIG – Who Insures the Insurers?

 

Following the financial crisis of 2008, the financial industry suffered backlash from the public following a historic and infamous series of events that threatened America’s economy.  From media pundits to organized efforts such as the “Occupy: Wall Street” movement, there has been a continual protest against the ‘injustice’ and corruption of greed that supposedly plagues large financial institutions.  However, many Americans rely on financial services for retirement savings, investment opportunities, the ability to get a mortgage and more.  Despite the complexity of many financial systems, which may be simply understood by the general public, the causes of the crisis held blame with those behind-the-scenes, and an ethical analysis can bring these actors and their decisions to light and provide a clear picture of what was done wrong and why.  Looking into AIG, a major player in the financial crisis, a history of ethically questionable management can be seen, with blatantly unethical choices leading underlying collapse of the financial system in 2008.

Revisiting America’s Affair with Financial Institutions

During the financial crisis of 2008, AIG was one of the most critical firms facing failure, and as the US Government stepped in to provide assistance in order to prevent the larger financial system from unraveling.  The outcome of the situation involves an overhaul of regulations a la Dodd-Frank, as well as a number of government-influenced management decisions after giving AIG a multi-billion dollar bailout.  My focus for paper 2 is to analyze the precedent AIG set for establishing a business of such magnitude on practices that could tear down the financial sector of the United States in a matter of weeks, and threaten the greater economy as a whole. 

Looking Behind the Curtains

After watching “Too Big to Fail,” it is clear that the financial crisis in 2008 further exacerbated the problem of “too big to fail.” The fact that “10 banks now hold 77% of all US bank assets” is proof of this (TBF). Clearly we didn’t learn from our mistakes…the size and span of these banks is what caused such destruction. Rather than learn from this, we made these banks even bigger. It is clear, however, that the government had little time to come up with a solution. A solution that, if not effective or executed fast enough, could have ruined the economy. Bernanke emphasizes this when they are trying to get the stimulus package passed: “If we don’t do this now…we won’t have an economy on Monday.”