Another example relates to AIG, which insured obligations of various financial institutions through the usage of credit default swaps. The basic CDS transaction involved AIG receiving a premium in exchange for a promise to pay money to party A in the event party B defaulted. However, AIG did not have the financial strength to support its many CDS commitments as the crisis progressed and was taken over by the government in September 2008. U.S. taxpayers provided over $180 billion in government support to AIG during 2008 and early 2009, through which the money flowed to various counterparties to CDS transactions, including many large global financial institutions. COUNT 5
QSN1 What firm insured obligations of various financial institutions using credit default swaps? ANS1 AIG QSN2 What does the abbreviation CDS stand for? ANS2 credit default swaps QSN3 When did the government take over AIG? ANS3 September 2008 QSN4 How much money did taxpayers provide in government support to AIG during 2008 and early 2009? ANS4 over $180 billion QSN5 What did AIG receive for promising to pay Party A in the event that Party B defaulted? ANS5 a premium