AIG turism Essay Example | Topics and Well Written Essays - 2000 words

AIG turism - Essay Example However, because the portions of the securities which AIG had guaranteed were judged to be almost risk free, there was not much thought that had been given to the scenario. At the end of the year 2007, through the different swaps, AIG had covered around $61 billion in securities with exposure to the different subprime mortgages. There are several prominent people that were involved in the fall of AIG, the most prominent was Martin J. Sullivan who at the time was the CEO of the company. Sullivan was blamed on taking on tens of millions of risk that was associated with the mortgages. Sullivan did not purchase any reinsurance on the risk as it was the norm Robert Willumstad, the chairperson of AIG Board of directors was also another prominent person involved in the fall of AIG. Joseph Cassano who was the AIG financial production division was accused of insuring to more than $441 billion value of securities that were in the first place rated AAA. Several companies were associated with the fall of 2008, they included the European Investment bank referred to as Goldman Sachs. Morgan Stanley and Merrill were also involved in the mess that came with the fall of AIG. AIG credit default swaps were insurance contracts that were unregulated, therefore, AIG did not put anything any capital as collateral and consequently it maintained what can be described as an AAA credit rating. Further, the company did not build any capital to back the insurance that they had sold and the profits it booked in any way never materialized. The default rates that were on mortgage securities were underwritten in the year 2006, and the year 2007. The underwritten securities increased in their worth and the by the last part of the year 2007, the securities that were in the banks which they claimed were AAA rated ended up being worth around $0.15 on the dollar. In the year 2008, there was the collapse of the credit default swap market which also meant that most investment