Note two points from the New York Times article on A.I.G.

There's arrogance, there's damn arrogance, and then there's this:

“It is hard for us, without being flippant, to even see a scenario within any kind of realm of reason that would see us losing one dollar in any of those transactions.”

— Joseph J. Cassano, a former A.I.G. executive, August 2007

And as noted here previously, the failure of the ratings agencies seems to be an important part of the mess:

Because the underlying debt securities — mostly corporate issues and a smattering of mortgage securities — carried blue-chip ratings, A.I.G. Financial Products was happy to book income in exchange for providing insurance. After all, Mr. Cassano and his colleagues apparently assumed, they would never have to pay any claims.

Comments

[Speedmaster]

Ouch.