AIG Failed, Taken Over By Fed
This is a picture I took two years ago in Shanghai. It’s the building where American International Group (AIG) used to be located 80 years ago. AIG was founded in 1919 by American entrepreneur Cornelius Vander Starr in Shanghai under the name American Asiatic Underwriters. In 1927, Starr moved his office to this building on The Bund, also called Zhongshan Road, on Shanghai’s waterfront. In 1931, American International Assurance (AIA) Co., Ltd., was established in this building (the Chinese on the building reads 美国友邦保险). In 1967, American International Group, Inc. (AIG) was formed in New York.
Today, September 16, 2008, AIG, the largest insurer in the world, has to be rescued by the government to avoid filing for bankruptcy protection, becoming the biggest victim in this sub-prime mortgage triggered credit crisis, which also brought down Bear Sterns, Lehman Brothers, and Merrill Lynch (Merrill avoided Lehman’s fate by being bought by Bank of America). AIG didn’t exactly fail (I guess AIG is indeed “too big to fail”), but the government does take control of the company by offering $85 billion dollars loan in exchange for 79.9% stake. It’s a sad day for the 89-year old company. However, if it signals the begining of the end of this financial crisis, then it is a good thing, better than let it collapse.
Can you ever imagine AIG could end like this?
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I don’t think this is the end of the financial crisis, just the beginning of the end. Others will fail shortly, along with at least one major bank, which could be WaMu. The sooner this happens the better.
Not allowing AIG to fail was a huge mistake and will prolong this downturn.
Sun,
Unbelievable, AIG was a $70 stock about one year ago.
However, my bigger concern is that failures like Lehman are affecting money market funds. Theoretically safe investments like money markets losing value means we are still likely to face more challenges before a turnaround. Unfortunately…