When the bailout team had reached a similar conclusion about Lehman twenty-four hours earlier, they had started preparing for bankruptcy. This time, the conclusion was the opposite. The financial markets would not withstand a second shock, and AIG’s level of interconnectedness through derivatives, repo and securities lending was even greater than that of Lehman. Letting AIG fail would, in the words of one Wall Street player, have been an “extinction-level” event.
