Risk Assessment Summary
In the fall of
, the Federal Reserve and Department of the Treasury determined thatthe systemic risk of a failure of AIG was so great that they should provide a supportprogram by injecting liquidity and equity capital into AIG.
To repay the debt and reduce the degree of financial risk to the firm, AIG has instituted awind-down of its Financial Products business and a massive divestiture process to sellbusinesses, despite the increasingly difficult M&A and credit environment.
The previously provided solution addressed short-term liquidity needs and AIG¶s over-concentration in the RMB
market. But AIG still faces massive investment losses andcredit downgrades. Without additional federal tools being deployed in the AIG situation, AIG will not be able to repay its obligations. Despite adequate current security against theU.
. government¶s investment, that investment may not be recovered.
AIG operates in more than 1
countries around the world, whose customers, regulators,and governments have thus far refrained from liquidating or seizing assets based largelyon the support given to AIG by the U.
The failure of AIG would cause turmoil in the U.
. economy and global markets, andhave multiple and potentially catastrophic unforeseen consequences.
The inability of AIG to immediately secure additional assistance from the Federal Reserveand the Department of the Treasury threatens not only AIG¶s sales process, but alsoconsumer and business confidence around the world.