AIG London office 'ground zero' of financial crisis

Friday, 13 March 2009 12:00

The London office of AIG has been dubbed the ‘ground zero’ of the financial crisis after an investigation revealed traders at the Mayfair office had lost billions of dollars.

Reporters at US network ABC claim trader Joseph Cassano led a team into risking half a trillion dollars (£359 billion) investing in toxic investments, which quickly lost their value amid the subprime crisis.

“AIG Financial Products was the core, the hottest point of the global financial crisis. It was the epicentre,” Peter Koenig, an investigative reporter, told ABC’s Good Morning America.

When the US housing market slumped, they had to come up with a half a trillion dollars, the reporters claimed, but due to a regulatory loophole they only had a “couple of million” to cover their losses.

Insurer AIG nearly collapsed last year and had to be bailed out by the US government, which now owns 80 per cent of the company.

Without help, its failure could have bankrupted the entire system, AIG warned the US government.

A spokesperson for AIG UK said the figure was inaccurate and the actual loss was “nowhere near that number”.

The spokesperson added AIG Financial Products, the unit where the trades were made, was separate to the insurance division and is now being wound down.

The Serious Fraud Office is investigating the activities at AIG’s London office.

Comments Bubble Comments

blog comments powered by Disqus

Twitter: My Finances

Join the conversation at #news_myfinances

Newsletter sign up


In addition to the weekly newsletter, which areas of finance would you like to hear from us about:

Tick this box if you would like us to send you promotions from carefully selected third parties.

By signing-up you agree to the terms of use and privacy policy.

sign-up button

Get the latest information on: