	Introduction

In 2007, American International Group (AIG) was the fifth-largest insurer in the world with $110 billion in overall revenues. Although primarily operating as an insurer, prior to the crisis AIG was overseen at the holding company level by the federal Office of Thrift Supervision (OTS) because the company owned a relatively small thrift subsidiary. Because AIG was primarily an insurer, it was largely outside of the normal Federal Reserve (Fed) facilities that lend to thrifts (and banks) facing liquidity difficulties and the normal Federal Deposit Insurance Corporation (FDIC) receivership provisions that apply to FDIC-insured depository institutions. AIG, as was true of most financial institutions, suffered losses on a wide variety of financial instruments in 2008. The exceptional losses which resulted in the essential failure of AIG arose primarily from two sources: 
the derivative activities of the AIG Financial Products (AIGFP) subsidiary, and the securities lending activities managed by AIG Investments with securities largely from the AIG insurance subsidiaries. The 2010 Dodd Frank Wall Street Reform and Consumer Protection Act (Dodd-Frank) overhauled the financial regulatory structure in the United States. FSOC designated AIG for enhanced supervision by the Fed in July 2013, and the designation was removed in September 2017. Summary of Government Assistance to AIG

The extraordinary direct government assistance for AIG that began in September 2008 ended in 2013. All loans to assist AIG have been repaid and the assets purchased from AIG by Federal Reserve entities have been sold. The common equity holdings in AIG that resulted from both Federal Reserve and U.S. Treasury TARP assistance for AIG have been sold. The Fed received a total of $8.2 billion in interest and dividends from these loans and the common equity stake resulting from the loans was sold by the Treasury for $17.55 billion. The Treasury received approximately $34.1 billion from its various sales of the TARP common equity, $20.3 billion from the preferred equity, $0.03 billion from the warrant sales, and $0.9 billion in cash dividends and other income. For example, TARP provided nearly $205 billion in additional capital to U.S. banks in 2008 and early 2009. Summing the various amounts of interest, dividends, and equity sales returned to the Treasury and Federal Reserve compared with the amount disbursed results in a positive return of $23.1 billion (including the CPFF amounts not included by Treasury in such calculations). This cash accounting, however, falls short of a full economic assessment of the assistance for AIG. The budgetary cost estimates undertaken by CBO incorporate some broader economic principles in assessing the costs of government actions. CBO estimates a budgetary cost of $15 billion attributed to the TARP portion of the AIG assistance, compared to a negative return of $12.5 billion using the simple cash accounting. The Federal Reserve actions which make up a majority of the returns from the government assistance for AIG are not subject to regular CBO or OMB budgetary cost assessment. CBO estimated a cost of $2 billion from the Federal Reserve loans to AIG at their inception, compared to a final positive return of $35.6 billion on a cash accounting basis. Troubled Asset Relief Program Assistance
Through TARP, the Treasury purchased $40 billion in preferred shares of AIG. The AIG loan, however, was subordinate to the Fed's. The Fed received approximately $5.9 billion in capital gains, with AIG receiving approximately $2.9 billion. Among other things, for applicable companies, the new language requires the adoption of standards by Treasury that
1. prohibit paying certain executives any bonus, retention, or incentive compensation other than certain long-term restricted stock that has a value not greater than one-third of the total annual compensation of the employee receiving the stock (the determination of how many executives will be subject to these limitations depends on the amount of funds received by the TARP recipient); 2. require the recovery of any bonus, retention award, or incentive compensation paid to SEOs and the next 20 most highly compensated employees based on earnings, revenues, gains, or other criteria that are later found to be materially inaccurate; 3. prohibit any compensation plan that would encourage manipulation of the reported earnings of the firm to enhance the compensation of any of its employees; 4. prohibit the provision of "golden parachute" payment to an SEO and the next five most highly compensated employees for departure from a company for any reason, except for payments for services performed or benefits accrued; and 5. prohibit any compensation plan that would encourage manipulation of the reported earnings of the firm to enhance the compensation of any of its employees.
American International Group (AIG), one of the world's major insurers, was the largest recipient of government financial assistance during the 2007-2009 financial crisis. At the maximum, the Federal Reserve (Fed) and the Treasury committed approximately $182.3 billion in specific extraordinary assistance for AIG and another $15.2 billion through a more widely available lending facility. The amount actually disbursed to assist AIG reached a maximum of $141.8 billion in April 2009. In return, AIG paid interest and dividends on the funding and the U.S. Treasury ultimately received a 92% ownership share in the company. The government assistance for AIG ended in 2013. All Federal Reserve loans have been repaid and the Treasury has sold all of the financial holdings that resulted from the assistance.
Going into the financial crisis, the overarching AIG holding company was regulated by the Office of Thrift Supervision (OTS), but most of its U.S. operating subsidiaries were regulated by various states. Because AIG was primarily an insurer, it was largely outside of the normal Federal Reserve facilities that lend to thrifts facing liquidity difficulties and the normal Federal Deposit Insurance Corporation (FDIC) receivership provisions that apply to banking institutions. September 2008 saw a panic in financial markets marked by the failure of large financial institutions, such as Fannie Mae, Freddie Mac, and Lehman Brothers. In addition to suffering from the general market downturn, AIG faced extraordinary losses resulting largely from two sources: (1) the AIG Financial Products subsidiary, which specialized in financial derivatives and was primarily the regulatory responsibility of the OTS; and (2) a securities lending program, which used securities originating in the state-regulated insurance subsidiaries. In the panic conditions prevailing at the time, the Federal Reserve determined that "a disorderly failure of AIG could add to already significant levels of financial market fragility" and stepped in to support the company. Had AIG not been given assistance by the government, bankruptcy seemed a near certainty. The Federal Reserve support was later supplemented and ultimately replaced by assistance from the U.S. Treasury's Troubled Asset Relief Program (TARP).
The AIG rescue produced unexpected financial returns for the government. The Fed loans were completely repaid and it directly received approximately $18.1 billion in interest, dividends, and capital gains. In addition, another $17.55 billion in capital gains from the Fed assistance accrued to the Treasury. The $67.84 billion in TARP assistance, however, resulted in a negative return to the government, as $54.35 billion was recouped from asset sales and $0.96 billion was received in dividends, warrants, and other income. If one offsets the negative return to TARP of $12.5 billion with the $35.6 billion in positive returns for the Fed assistance, the entire assistance for AIG showed a positive return of approximately $23.1 billion. It should be noted that these figures are the simple cash returns from the AIG transactions and do not take into account the full economic costs of the assistance. Fully accounting for these costs would result in lower returns to the government, although no agency has performed such a full assessment of the AIG assistance. The Congressional Budget Office (CBO) estimates of the budgetary cost of the TARP assistance for AIG, which is a broader economic analysis of the cost, find a loss of $15 billion compared with the $12.52 billion cash loss. CBO does not, however, regularly perform cost estimates on Federal Reserve actions.
Under the Dodd Frank Wall Street Reform and Consumer Protection Act (P.L. 111-203), the Financial Stability Oversight Council designated AIG for enhanced regulation by the Fed in July 2013. This designation was removed in September 2017.