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Fatal Risk: A Cautionary Tale of AIG's Corporate Suicide
Long-listed for the FT & Goldman Sachs Business Book of the Year Award 2011The true story of how risk destroys, as told through the ongoing saga of AIG
From the collapse of Bear Stearns and Lehman Brothers, the subject of the financial crisis has been well covered. However, the story central to the crisis-that of AIG-has until now remained largely untold. "Fatal Risk: A Cautionary Tale of AIG's Corporate Suicide" tells the inside story of what really went on inside AIG that caused it to choke on risk and nearly brining down the entire economic system. The book
Reveals inside information available nowhere else, including the personal notes and records of key players such as the former Chairman of AIG, Hank GreenbergTakes readers behind the scenes at the U.S. Treasury and the Federal Reserve Bank of New YorkDetails how an understanding of risk built AIG, but a disdain for government regulators led to a run-in with New York State Attorney General Eliot Spitzer
"Fatal Risk" is the comprehensive and compelling true story of the company at the center of the financial storm and how it nearly caused the entire economic system to collapse.
From the collapse of Bear Stearns and Lehman Brothers, the subject of the financial crisis has been well covered. However, the story central to the crisis-that of AIG-has until now remained largely untold. "Fatal Risk: A Cautionary Tale of AIG's Corporate Suicide" tells the inside story of what really went on inside AIG that caused it to choke on risk and nearly brining down the entire economic system. The book
Reveals inside information available nowhere else, including the personal notes and records of key players such as the former Chairman of AIG, Hank GreenbergTakes readers behind the scenes at the U.S. Treasury and the Federal Reserve Bank of New YorkDetails how an understanding of risk built AIG, but a disdain for government regulators led to a run-in with New York State Attorney General Eliot Spitzer
"Fatal Risk" is the comprehensive and compelling true story of the company at the center of the financial storm and how it nearly caused the entire economic system to collapse.
368 pages, Hardcover
First published March 3, 2011
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604 people want to read
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August 4, 2011You don't have to be an insurance/financial nerd to get this book.
This is the story behind the story of the financial crash. Everyone who thinks they've been hoodwinked by the government, Goldman Sachs, or AIG should read it.
I worked at AIG for 25 years ago and probably learned more about how the world works in my first week than in four years of college.
When I read in 2005 that legendary CEO Hank Greenberg was out, I thought, there goes the company. Actually, there went the US economy. This book supports my initial instinct that Eliot Spitzer, in ousting Greenberg on a spurious accounting fraud charge (just thrown out of court again yesterday) did more to enable the bubble and crash than any other single player.
It took only one month of Greenberg's absence -- and the terms of his severance were so onerous, he was not, as he should have been, kept on as an advisor -- for the business that sunk the company to be off and running. AIG was essentially brain-dead, a Leviathan without a head.
Boyd's fascination with his material is reflected in his vivid writing -- a challenge when the topic is financial products. More important, he comes to the subject with an open mind. Despite declaring his mission as exposing "financial filth", he steers clear of the condemnatory snark that characterizes so many of the other big books on the crisis.
I have read "Too Big to Fail", "All the Devils Are Here" and the hilariously naive "Griftopia." Of these, "Fatal Risk" is the most solid and informed book about the financial crisis, and should be read alongside the equally excellent "Fallen Giant" by Ron Shelp (former AIG-insider)which focusses on the history of AIG and the rise of Hank Greenberg.
This is the story behind the story of the financial crash. Everyone who thinks they've been hoodwinked by the government, Goldman Sachs, or AIG should read it.
I worked at AIG for 25 years ago and probably learned more about how the world works in my first week than in four years of college.
When I read in 2005 that legendary CEO Hank Greenberg was out, I thought, there goes the company. Actually, there went the US economy. This book supports my initial instinct that Eliot Spitzer, in ousting Greenberg on a spurious accounting fraud charge (just thrown out of court again yesterday) did more to enable the bubble and crash than any other single player.
It took only one month of Greenberg's absence -- and the terms of his severance were so onerous, he was not, as he should have been, kept on as an advisor -- for the business that sunk the company to be off and running. AIG was essentially brain-dead, a Leviathan without a head.
Boyd's fascination with his material is reflected in his vivid writing -- a challenge when the topic is financial products. More important, he comes to the subject with an open mind. Despite declaring his mission as exposing "financial filth", he steers clear of the condemnatory snark that characterizes so many of the other big books on the crisis.
I have read "Too Big to Fail", "All the Devils Are Here" and the hilariously naive "Griftopia." Of these, "Fatal Risk" is the most solid and informed book about the financial crisis, and should be read alongside the equally excellent "Fallen Giant" by Ron Shelp (former AIG-insider)which focusses on the history of AIG and the rise of Hank Greenberg.
May 15, 2025
Highlights key man risk and organisational failure after key leadership leaves. AIG moved from a pure-play insurance company to having AIGFP in the finance world, with CDSs on CDOs, reserved lightly, leading to huge losses and credit rating downgrades with a downwards spiral of collateral calls. Story of regulatory capture, arbitrage, and no regulator considering systemic risk. Glass-Steagall repeal under Clinton allowed Wall St to make highly levered bets using standard deposits.
“The Fed slept on a shadow banking system of investment banks, monoline insurers, structured investment vehicles, incredibly leveraged banks, hedge funds, and AIG all dropped billions of dollars’ worth of non recourse hooks into the depositary institutions they did regulate.”
“The Fed slept on a shadow banking system of investment banks, monoline insurers, structured investment vehicles, incredibly leveraged banks, hedge funds, and AIG all dropped billions of dollars’ worth of non recourse hooks into the depositary institutions they did regulate.”
October 15, 2011
Surely one of the better informed books on the crisis. A more technical read that delves more deeply into AIG's operations and the sort of trades they were putting on. The specificity of the subject means Boyd isn't writing a broad structural critique of the system although he does throw in some comments on this front in the epilogue. First and foremost it is a narrative of how AIG crossed over from insurance -- the underwriting of risks -- to finance -- the trading of risk. It is enormously informative and actually not as harsh on financial innovation as other 'crisis' books -- his reporting suggests that early on AIG Financial Products was an enormously successful, creative, and even safe group that focused on arbitraging AIG's corporate balance sheet to taking on long term risks that others couldn't. It seems rather that it was failure of internal controls -- in particular of lines of communication between an increasingly complex financials division and a management that did not fully understand or try to understand that division -- that led to breaches in risk management. At the broader level he argues (persuasively but not thoroughly in my view) that the roots of the crisis stemmed from the repeal of Glass Steagall, which allowed commercial banks with vast funding sources (deposits) to enter investment banking. This intensified competition in i-banking and forced the i-banks, which used to be more cautious (when trading with partners capital), into a hunt for profits from riskier and riskier trades done on thinner and thinner margins. Hence lending to increasingly marginal subprime borrowers.
The book also praises some of the Fed's efforts in the Maiden Lane bailouts of AIG - he explains quite clearly here what went on, without the polemic language of other writers. More controversially he praises Goldman Sachs for its internally expressed caution and superior risk management -- Boyd recognises that perhaps certain customer trades were done that should not have been done (the vampire squid accusations) but steps back from Manichean lambasting and paints what I think is a positive and educational picture of how Goldmans' culture, especially on the trading floor, is one first and foremost of self-honesty. In that respect GS was the first i-bank on the street to be honest -- to themselves -- about the value of the CDOs they had sold and that customers like AIG had put up as collateral. Thus quite early on -- in 2006 I think -- they started asking AIG to put up more collateral on swaps (margin loans) that GS made to them to fund their purchase of these CDOs instruments. Other individuals in other i-banks had also voiced concern -- e.g. JP Morgan bankers, according to Gillian Tett's Fool's Gold, but JPM wasn't really on the CDO trade -- but what in GS' case was remarkable was that while part of the bank was making lots of profits from selling CDOs and wanted to keep doing so, internally they were willing to listen to individuals' concerns that the mortgage market was in trouble -- and act on it to protect themselves. (I.e. managing at an institutional level to work through the psychological dissonance when something is making your money but you think it will blow up longer term.) Fair enough -- apart from buying CDS protection on AIG and shorting the mortgage market they should also have stopped writing and selling CDOs -- but Boyd is here discussing their superior risk management and not their business ethics.
Really the main takeaway I have from this book is just how important risk management is and how much time and how deeply the top financial minds spend thinking about risk -- not just in GS but Hank Greenberg, Howard Sosin and the other men who successfully built AIG and AIG Financial Products in the first place, before these institutions were taken over by others who didn't appreciate or understand risk as deeply.
The book also praises some of the Fed's efforts in the Maiden Lane bailouts of AIG - he explains quite clearly here what went on, without the polemic language of other writers. More controversially he praises Goldman Sachs for its internally expressed caution and superior risk management -- Boyd recognises that perhaps certain customer trades were done that should not have been done (the vampire squid accusations) but steps back from Manichean lambasting and paints what I think is a positive and educational picture of how Goldmans' culture, especially on the trading floor, is one first and foremost of self-honesty. In that respect GS was the first i-bank on the street to be honest -- to themselves -- about the value of the CDOs they had sold and that customers like AIG had put up as collateral. Thus quite early on -- in 2006 I think -- they started asking AIG to put up more collateral on swaps (margin loans) that GS made to them to fund their purchase of these CDOs instruments. Other individuals in other i-banks had also voiced concern -- e.g. JP Morgan bankers, according to Gillian Tett's Fool's Gold, but JPM wasn't really on the CDO trade -- but what in GS' case was remarkable was that while part of the bank was making lots of profits from selling CDOs and wanted to keep doing so, internally they were willing to listen to individuals' concerns that the mortgage market was in trouble -- and act on it to protect themselves. (I.e. managing at an institutional level to work through the psychological dissonance when something is making your money but you think it will blow up longer term.) Fair enough -- apart from buying CDS protection on AIG and shorting the mortgage market they should also have stopped writing and selling CDOs -- but Boyd is here discussing their superior risk management and not their business ethics.
Really the main takeaway I have from this book is just how important risk management is and how much time and how deeply the top financial minds spend thinking about risk -- not just in GS but Hank Greenberg, Howard Sosin and the other men who successfully built AIG and AIG Financial Products in the first place, before these institutions were taken over by others who didn't appreciate or understand risk as deeply.
August 2, 2023
4 stars because of all the accounting and insurance details. But that's what made it so tough to wade thru. The 2nd half got more interesting and showed me why the Gov't couldn't let it collapse. I am now interested in books on Spitzer (NY AG), Boise (atty) and the biographies of Bernanke and others who went through this crisis.
July 3, 2011
Boyd did a fantastic job of explaining AIGs history and presented a compelling analysis of the both the institutional and personal drivers that led to the decisions that resulted in the collapse of AIG.
However, the story-telling aspect of this "Tale" really fell flat. The presentation was choppy, and ultimately distracting. Though probably unavoidable given the subject matter, parts of this book is not readily accessible to those who only have a surface familiarity with derivatives, securitization, and the capital markets. However, Boyd's telling of the events surrounding AIG's demise has inspired me to learn more about these topics, and was certainly not off-putting.
However, the story-telling aspect of this "Tale" really fell flat. The presentation was choppy, and ultimately distracting. Though probably unavoidable given the subject matter, parts of this book is not readily accessible to those who only have a surface familiarity with derivatives, securitization, and the capital markets. However, Boyd's telling of the events surrounding AIG's demise has inspired me to learn more about these topics, and was certainly not off-putting.
June 15, 2023
Largely a hagiography to Hank Greenberg, this book is a half baked attempt to explain what happened to AIG to lead it to its eventual demise in the GFC. The fall of AIG is covered in scant detail, with much of the book's focus resting on minutiae of individual AIG officer's lives and Eliot Spitzer's witch hunt of Hank Greenberg with the help of Paul Weiss.
I was hoping for a more lucid explanation of the process of AIG's unraveling and how they ended up there in the first place.
I was hoping for a more lucid explanation of the process of AIG's unraveling and how they ended up there in the first place.
January 12, 2018
Interesting and instructive, but should approach book having some knowledge of finance and accounting to better appreciate it. Also, it is more appropriately a supplement to one interested in AIG’s experience in the mortgage crisis or just AIG and Hank Greenberg.
May 15, 2023
The first quarter of this book was too fawning over what it considered the "good old days" of AIG's operations and FP sector, but it definitely delivered what I was looking for in the end: pure, delicious, unfiltered corporate chaos a la 2008.
February 27, 2025
- Overall I liked the book but didn’t love it. The author jumped around timelines a lot and was sometimes hard to keep track. And would go into weird detail about unrelated things. I don’t feel like it really made me understand AIGFP that much more.
July 8, 2018
One of the best accounts of the collapse of AIG and the ensuing financial disaster I've ever read.
November 27, 2011
This is a history of how Wall Street went astray, with emphasis on AIG's Financial Products Group. The big themes are all well stated and the section on how Elliot Spitzer abused his position as AG of New York is worth the price of the book alone as perhaps the biggest cautionary tale. I give the book only two stars because of the soft gloves treatment of Hank Greenberg. Greenberg was forced out of his lifetime leadership position at AIG and then events exploded. The timing was coincidence. The author, especially in the last chapter, makes it sound like if Hank had been around none of the issues would have happened. Nonsense! Greenberg planted all the seeds, fertilized and watered the plot. He was lucky not to have been around to see the crop! It is a true disservice to present this as history. Now that Greenberg has decided to sue the government for misappropriation of property, the public will get another opportunity to understand the flaws of this gentleman who can never seem to do anything but blame everyone else for his failings.
May 31, 2020
One of the better-informed books on the crisis. A more technical read that delves more deeply into AIG's operations and the sort of trades they were putting on. The specificity of the subject means Boyd isn't writing a broad structural critique of the system although he does throw in some comments on this front in the epilogue. First and foremost it is a narrative of how AIG crossed over from insurance -- the underwriting of risks -- to finance -- the trading of risk.
Mba Assignment Maker
Mba Assignment Maker
June 9, 2011
My only beef with the book is the cumbersome sentence structure. I shouldn't complain because mine is probably no better (if not worse) but at times the embedded clauses made sentences hard to follow.
And that is my only beef. The book did a great job of telling the history of AIG and how they got themselves involved in the mortgage mess. It is my hope that policy makers read this book to better understand what happened.
And that is my only beef. The book did a great job of telling the history of AIG and how they got themselves involved in the mortgage mess. It is my hope that policy makers read this book to better understand what happened.
December 22, 2015
I don't buy the hagiography of Greenberg here or the demonization of Spitzer - the latter is particularly hard to take in a chapter that details clearly criminal behavior on AIG's part. I'm also not sure Boyd knows who his audience is for this book - if you make it through the first 150 pages you certainly don't need the explanation (on page 149) of what a short sale is. Outside those two large caveats, this is full of incredibly well-researched anecdotes and detail.
January 22, 2012
An interesting look at the collapse of AIG during the Fall of 2008. The first third is filled with a history of the insurance company and explanations of the financial transactions that led to the largest bailout of the financial crisis. The book picks up steam in the final third as things fall apart. Not always an easy read but very informative if you want to know why the crash happened.
August 18, 2012
I have no idea how accurate the book is in places, but it's a very well-written book and a compelling read. There are various editorial comments the author makes with which I personally disagree, but they are not disguised as facts and you either agree with them or not. Either way, the book is a fascinating history of AIGFP. It was difficult to put down.
November 10, 2013
While the book had some good facts and stories, the sentence structure was inconsistent. I felt like sentences were too long and trying to capture multiple thoughts with attempts at foreshadowing. It made the book difficult to read. I have read many books about the financial crisis and felt that this book did not materially add to my understanding of the events of 2008.
April 20, 2011
I enjoyed this fine. Something to read on the treadmill. If you don't like a trite expressions like "Kabuki" referencing lawyers defense tactics, "Rock Ribbed Republicans" and other tiresome and unoriginal phrasing, you'll be annoyed. I say, the guy is a numbers guy, not a literary aspirant.
August 18, 2011
Interesting. Quite technical and I would think dense in parts for people not familiar with the language of finance. Also the language is very 'journalistic'! Deals well with an amazing financial disaster exploring the many facets of the AIG debacle and the credit crisis of 2008.
August 25, 2011
Imagine how many stars it would have gotten if they'd proofread past page 82.
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September 11, 2016[redacted]
DNF
DNF
Want to read
January 6, 2013This book is unreadable!
August 5, 2015
A bit disorganized, as it jumps back & forth in time & isn't always clear about which company is being referred to, but the story is good and I was able to get the information I needed from it.
September 7, 2014
Very well done, and very readable
January 9, 2016
very interesting read, if a bit of a slog at times
Displaying 1 - 25 of 25 reviews