Wednesday, December 31, 2008

The Downfall of AIG

Those of you outside of Washington, DC likely missed the Washington Post's three-part investigation of the events leading to the downfall of AIG.

It makes for good holiday reading. I highly recommend the series to you.

Knowing the culture at AIG from many years of activity with the company and its leadership, I can tell you the story certainly has the culture right.

While this is not a health care story per se, it is a story about risk taking and understanding, and never getting cocky about, risk. AIG execs argued for years they really had no risk in their credit default swap business. My experience is that when someone is willing to pay you lots of money to lay a risk off on you--in this case a whopping $80 billion of exposure--there is risk.

You can read the full report here.
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