AIG Warned of 'Crisis' if Government Didn't Help
Draft obtained by ABC News warned of worldwide crisis if no bailout.
March 9, 2009— -- An AIG report to the Treasury Department last month warned that if the government didn't come to its rescue again, its collapse would trigger a "chain reaction of enormous proportion" that would "potentially bankrupt or bring down the entire system" and make it impossible for AIG to repay the billions it already owed the U.S. government.
Four days later, AIG was given $30 billion in federal aid on top of the $130 billion it had already received.
Read the AIG Report to the Treasury Department here.
A draft of the report, obtained by ABC News, was marked "strictly confidential." It said, "The failure of AIG would cause turmoil in the U.S. economy and global markets and have multiple and potentially catastrophic unforeseen consequences."
The draft was dated Feb. 26. On March 2, the Treasury Department and the Federal Reserve system announced that AIG, which lost $61.7 billion in the fourth quarter of 2008, would receive $30 billion in new government help.
AIG warns in its report of the "systemic risk" that a potential collapse posed. It describes a "systemic risk" as one that "could potentially bankrupt or bring down the entire system or market."
The company said, "What happens to AIG has the potential to trigger a cascading set of further failures, which cannot be stopped except by extraordinary means."
"The inability of AIG to immediately secure additional assistance from the Federal Reserve and the Department of the Treasury threatens not only AIG's sales process, but also consumer and business confidence around the world," it said.
The report referred to the unexpected downward economic spiral after the Fed allowed Lehman Brothers, the giant investment bank, to collapse last fall. AIG said the damage to credit market would "dwarf the Lehman fallout."
The Treasury Department told ABC News it would have no comment on the report, and the White House referred questions to the Treasury Department.
Late today, AIG released a more recent version of the draft, dated March 6. The language in it was substantially the same as in the copy obtained earlier by ABC News.
The company points out in the report that it operates in 140 countries and is the largest insurer in the Mideast, Southeast Asia, Hong Kong, the Philippines, Thailand and Japan. It argues that its failure would create a "crisis of confidence" worldwide.
Related Stories
ABC News Live