The large U.S. insurer bailed out by the federal government in 2008 was American International Group, or AIG.
AIG ran into crisis through its Financial Products division, which had sold enormous amounts of credit-default-swap protection tied to mortgage-related securities. When those securities lost value, AIG faced demands for additional collateral and a severe liquidity shortage. Its failure threatened banks and other institutions around the world.
On September 16, 2008, the Federal Reserve Bank of New York authorized an emergency credit facility initially worth up to $85 billion. In exchange, the government received a 79.9% equity stake. The rescue was later restructured and expanded; total government commitments eventually reached roughly $180 billion.
A common mix-up is confusing AIG’s rescue with the $700 billion Troubled Asset Relief Program, or TARP, enacted in October 2008. TARP was a broader federal program, while AIG’s initial rescue was a separate Federal Reserve intervention. AIG ultimately repaid the government, and the Treasury sold its remaining shares in 2012.