AIG and other insurance companies were bailed out during the financial crisis. Describe why the bailout was necessary. Describe the details of the bailout. Why was it necessary? Present arguments for and against the bailout. Describe what has happened to AIG since 2009.

The bailout of AIG turned into a gain for the government, TARP investments in the biggest banks have been repaid at a profit, and the Treasury Department is selling off stakes in smaller institutions at an admirable pace. Taxpayers are being compensated for stabilizing the economy at a critical time.
Four years after the worst phase of the financial crisis, however, it is time to end the most costly bailout of all: the government takeover of Fannie Mae and Freddie Mac. Keeping the two housing-finance firms alive has been expensive. Treasury has invested $187 billion in the companies and has received $46 billionin dividends, for a net cost of $141 billion so far.
This support has allowed the two companies to continue to service the $4.5 trillion in guarantees against mortgage default and $900 billion in debt that they had racked up before the crisis, and to underwrite trillions of dollars in new mortgage credit. As a result, Americans have been able to get mortgages to buy homes and (especially) to refinance at lower interest rates.

he crisis lasted for several years, and some speculate that it is still not entirely over. The financial traumas that AIG experienced were exploited all across newspapers and media outlets, mainly because their risk management solutions can be blamed with the company’s quick downfall.

Credit Default Swaps and AIG
AIG was a company that was involved with CDS and the writing of it. This contract, protecting both the buyer and the seller, offers protection from the seller in the event of default of an underlying entity. In exchange for that protection the buyer pays a sum of the premium to the seller. It was after the housing market crash that AIG began facing their biggest mishaps. This was a time when more than $440 billion of fixed incomes were being managed by the company. When companies searched for CDS protection during the economical downfall they also sought payouts from AIG. It was these requests as well as increased requirements for insurance standards that caused AIGs pitfall.
Not Enough to Cover it All
Because of the substantial amount of the payouts that were requested, AIG suffered greatly and faced a crunch of their liquidations. They did not have the available cash to pay these claims this it was necessary for the liquidation to occur. This damaged the reputation of AIG greatly. What was once a well-known company was now considered to be on a downfall. A $180 million bailout was needed, and AIG, in the end, come through and remained in business. This was with the help of government money and sources, however, as well as many changes within the AIG organization.

The economic impacts that were experienced were felt by a large number of people of all backgrounds. This includes big names such as AIG. They, too, suffered, and it was, perhaps bad planning and strategies, combined with the wrong timing, that caused their bailout. They survived, however, and continue to serve the needs of their customers through a variety of insurance policies and packages that are still available. Financially they have been able to begin the road of recovery and are back on the right tracks.