Finance & EconomicsConfirmed
AIG bailout (Sep 16 2008 onwards)
The Federal Reserve extended an $85 billion emergency credit facility to American International Group on 16 September 2008 — the day after Lehman Brothers filed for bankruptcy — to prevent AIG's collapse from triggering cascading defaults across the global financial system. The rescue was later expanded to a combined Fed and Treasury TARP exposure of approximately $182.5 billion. AIG Financial Products, operating from London under Joseph Cassano, had sold $441 billion in credit-default swap protection on subprime CDOs with inadequate collateral reserves. When AIG was bailed out, approximately $62 billion flowed through to Goldman Sachs and other financial counterparties at face value — a "pass-through" that drew intense Congressional scrutiny. The $165 million bonus controversy of March 2009 further inflamed public anger. The government ultimately reported a combined profit on the rescue by December 2012. A shareholder lawsuit (Starr v. United States) reached the Supreme Court; the Court unanimously affirmed the Fed had legal authority to act.