AIG (Bailout)

AIG's 2008 bailout—$182 billion, the largest in history—demonstrates how derivatives can create systemic risk invisible to regulators. The insurer's London unit sold $400 billion in credit default swaps without reserves to pay claims. When Lehman failed, AIG owed more than it was worth. Like an organism that promised to feed the whole ecosystem during famine, AIG's collapse would have starved every connected entity.