In case you missed it, AIG recently announced that due to an internal accounting error, they understated their losses. Their Mistake cost them over $4 billion dollars in previously undisclosed losses, and sent the market reeling as another US bank 'fesses up for their mistake.
What was their mistake? I'm glad you asked. Like any financial bank, they have a number of investments, and just like almost every other bank in this country, they invested heavily in the Sub-Prime lending that took our economy by storm the last couple of years.
To mitigate risk (short hand for: reduce the chance that this exploitative lending practice would bankrupt them) they decided to chop up these crummy investments, then mix them in with Grade-A bonafide home mortgages and sell them off to investors like a butcher selling funky sausage.
But they aren't the first financial institution to fall prey to their own stupidity. They are just the latest and everyone is paying for it.
Damn you Mr. Biv.
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