Who Got Bailed Out First during the Financial Crisis?

The government took action to address the financial crisis by bailing out large financial institutions such as AIG (American International Group), Bank of America, and Citi Bank. The first bailout was on September 16, 2008 when the Federal Reserve Board authorized the Federal Reserve Bank of New York to lend $85 billion to AIG.

This bail out was issued because the Board of Governors of the Federal Reserve System was trying to prevent further damage and fragility to the financial market. Despite the good practices and ethical behavior of many revenue cycle management service companies, financial institutions, and banks who worked hard to do the right thing, government financial assistance was crucial at this time.

Two months later on November 10, 2008, the government decided to restructure the financial support they were giving AIG by allowing the Treasury to purchase $40 billion of AIG preferred shares under the Troubled Assets Relief Program (TARP). A portion of this purchase was used to decrease the amount of the loan given to AIG from the Federal Reserve from $85 billion to $60.

This decrease in the price of the loan expanded the life span of the loan from 2 years to 5 years, which was necessary to fully aid AIG (USTreas.gov).  In this particular case, it was the correct decision for the government to interfere and help out AIG because if they did not, AIG may have added even more devastating consequences to the economy if they declared bankruptcy. Essentially, AIG was “too big to fail” so the federal government made an accurate and successful decision by bailing out AIG.

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