Better Than Bankruptcy
It's hard to understand why anyone would suggest that it would have been better for American International Group (AIG) to file for bankruptcy court protection than to receive help from the Federal Reserve ["Effectiveness of AIG's $143 Billion Rescue Questioned," news story, Nov. 3].
Bankruptcy filings almost always result in no return to shareholders because creditors get paid first. And a bankruptcy filing for a financial services company such as AIG would have destroyed, not preserved, value for our shareholders. Although AIG shareholders have suffered severely during the recent crisis, they have retained 20 percent of the company as well as the prospect of seeing their remaining investment recover and grow.
In addition to the harm it would have done to AIG shareholders, a bankruptcy filing would have fueled the growing crisis with untold damage for the U.S. economy and the rest of the world. AIG does business with more than 70 million customers in 130 countries and jurisdictions, and the risk to the global financial system from an AIG bankruptcy filing would have been enormous.
The Fed loan was a far better alternative to bankruptcy.
Senior Vice President, Communications
American International Group