But why? Where is all that money going? I went in search on the internet and found some information at NPR. Turns out AIG's leaders are not only incompetent, but they accumulated a lot of bad debt. The reason they're losing money is because they didn't really have it in the first place. Now banks want their insurance. Read about how stupid their execs were here. The company is also being sued by former CEO, Hank Greenberg.
AIG has to be saved, in part, to prop up European banks.
NPR: STEVE HENN: AIG insures lots of stuff -- not just life, property and casualty. Remember those credit default swaps?
Gradient Analytics' Donn Vickery says those swaps are basically insurance guaranteeing banks' investments. But AIG . . .
DONN VICKERY: . . . Did not appear to understand how to value them. And worse yet, they didn't hedge any of their risk.
Vickery says AIG was an insurance company selling insurance without really understanding the risks.
VICKERY: Right, exactly.
And it's not just mortgage-backed investments that AIG's wrapped up in. The company has lots of business lines.
Reaction:
Update 3-7: WSJ explains some more.
