Wednesday, October 3, 2012

Insurance giant AIG, the company that gave us the “too-big-to-fail” ethos in the first place, was notified by the feds this week that it may officially be deemed too big to fail and, thus, subject to enhanced scrutiny and regulatory oversight. In the wake of the 2008 financial crisis, “too big to fail” is the nomenclature commonly applied to banks and other financial institutions the failure of which would significantly threaten the United States' financial stability.  

If AIG is classified as a “systematically important financial institution” (which is what the government calls it because “too big to fail” is too succinct and accurate) under the Dodd-Frank Wall Street reform rules, it would be the only insurance company to receive that honor.

The Financial Stability Oversight Council is currently reviewing AIG and its final decision is TBA. 

The market apparently doesn’t mind the idea of a too-big-to-fail AIG—the company’s stock ticked up slightly upon news of its potential for a more rigorously overseen future.