Sep 18 2008
Behind the AIG Story
The Wall Street Journal has an excellent article that follows the events that led to the Fed bailout of AIG. ( Bad Bets and Cash Crunch Pushed Ailing AIG to Brink ) What is surprising is how AIG kept underestimating the amount needed to keep solvent. First it was $20 billion, then $40 billion, then $60 billion, then $70 billion, then $80 billion. How can management put together a deal when it doesn’t know its financial position? The answer is: it can’t.
It is clear now why Hank Greenberg’s attempt at a bridge loan failed. The numbers were probably much bigger than what he was initially told.