AIG is an insurance company. They held policies for many banks and financial institutions, insuring them against losses. What I don’t understand is why we aren’t talking about the banks knowingly making bad loans then getting bailed out as the result of having an insurance policy against bad loans! Talk about gaming the system! Make loans to people you know won’t or can’t make good on and then get insurance monies for the losses that you intentionally incurred.
We are bailing out people who intentionally created losses knowing that it didn’t matter because there was an insurance policy that would keep them from being held accountable or their stockholders from losing any money. The problem arose because nobody was taking into account that the approach would work dependably as long as not too many people took advantage of the system and NOBODY wanted to be the one to say ENOUGH.