AIG

The American Insurance Group, more commonly known as AIG, is one of the largest insurance companies in the world.

It was a major player in the Financial Crisis of 2008 because it sold $441 billion in unhedged and undercapitalized insurance on securitized debt, much of it tied to mortgage values. Normally an insurance company "lays off" some of the risk by taking out indurance with another company. AIG neglected to do this because it never expected the securities to turn toxic, which they did. Either someone paid the insurance or the nation's financial system would colapse, so the government stepped in, seized AIG, and paid the insurance.

During the 2008 financial crisis, it was bailed out by the Bush administration and the Federal Reserve after facing the prospect of bankruptcy. The government has spent over $170 billion to shore up AIG--with more coming--because it insured big banks against losses from securities that turned out to be "toxic" and lost much of their value.

In March 2009 a firestorm of public protest exploded when it was discovered the U.S. Treasury under Secretary Timothy Geithner had given out over $160 million in bonuses for work in 2008 to the AIG traders who caused over $60 billion in losses in 2008. A law to "claw back" the bonuses by special taxes passed the House and is before the Senate. The House version applies to all bonuses by financial institutions that have received $5 billion or more in federal bailous money, which includes all the larger banks. The public outrage ended the Obama Administration's opportunity to ask Congress for more bailout billions.