2010 0526 - Joint Written Testimony of Thomas C. Baxter, Executive Vice President and General Counsel, and Sarah Dahlgren,
Executive Vice President, Special Investments Management, Federal Reserve Bank of New York before the Congressional Oversight Panel regarding The Federal Reserve Bank of New York’s Involvement with AIG May 26, 2010 - 14p

AIG’s role as one of the world’s largest and storied insurance companies meant that its failure likely would have had a contagion effect, causing damage as it spread throughout the insurance industry.

• Policy holders would be hurt.
• Municipalities, who were already reeling from a lack of financing options for their building projects, would have seen their financial protection disappear.
• Workers whose 401(k) plans had purchased $40 billion of insurance from AIG against the risk that their stable value funds would decline in value would see that insurance disappear.
• Pension plans that had placed funds in AIG guaranteed investment contracts, or GICs, which function much like deposits in a bank, would have experienced significant losses, losses that would be passed along to retirees or to others whose aspirations to be retirees would surely have been changed.

And these indirect consequences of an AIG bankruptcy would not have stopped at the U.S. border.

• AIG was global in scope.