Why was the company AIG significant during the 2008 financial crisis?
A. It refused to offer loans to banks
B. It became a top bank in Asia
C. It sold too many credit default swaps it could not cover
D. It owned the most real estate in the U.S.
Answer (1)
The correct answer is letter C. It sold too many credit default swaps it could not coverAIG, an insurance company, sold credit default swaps (CDSs) to investors as protection if their investments failed. When the housing market collapsed, many of these investments did fail, and AIG did not have enough money to pay all the claims. This caused panic. The U.S. government had to rescue AIG because its failure could have led to more damage in the financial system. It showed how a single company’s actions could affect the whole world economy.
