The financial crisis of 2007-2009 has resulted the assessment of the financial industry operations. Before the crisis it was long believed that the markets are self-regulatory and do not require regulatory bodies to govern them. However, the crisis invoked the development of perceptions that were quite opposite of the past view. Strong believers of the self-regulatory markets such as Alan Greenspan have had changed views because of the financial crisis and led them to agree to the problems that the old belief had had. This case discusses the proceedings which led up to the AIG’s bailout. The discussion also continues till after this bailout. The case also debates on the role of the external and internal factors causing the AIG crisis. It is aimed at the prevention of such a crisis in the future.
1- How did the Corporate Structure of AIG contribute to its failure?
2- Describe how the regulatory environment contributed to market reliance on AIG and how that reliance exacerbated financial market problems?
3- Compare the operations of AIG-FP to that for insurance firms. Describe how the practices of AIG-FP contributed to its failure.
4- Broadly describe regulations that a) would have prevented the financial market problems caused by AIG and b) can prevent a recurrence of these problems?