AIG and the 2008 financial collapse

AIG and the 2008 Financial Collapse
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Assessments of the financial crisis began in August 2007. Most of these assessments identify the sources of the global financial crisis as poor control of risks, excessive leverage, and an almost willful blindness to the bubble- like conditions within the housing market CITATION Gre08 \l 1033 (Grey Court, 2008).
Since 2007, sentiments have been that the financial crisis in which the global economy has been immersed in is an ethical crisis. Evidence that originates from studies of the behavior of agents who were responsible for decision making leading to the crisis reveals tremendous incidences of unethical mistakes CITATION Arg12 \l 1033 (Argandoña, 2012). Early explanations were of the idea that most scandals that led to the financial crisis were due to a few individuals. However, recent research revealed that it is not a few individuals who engage in unethical practices, but almost every individual is susceptible to forces that result into questionable decision making CITATION DeC10 \l 1033 (De Cremer, Van Dick, Tenbrunsel, Pillutla, & Murnigha, 2010).
Most individuals and organizations in the world of business are aware of the range of behaviors that are unacceptable in the work and marketplace. In addition, these business individuals are aware of the ethical and appropriate rules of decision making and moral behaviors including their promotion. However, decisions and behaviors that are unethical and irresponsible still emerge CITATION DeC10 \l 1033 (De Cremer, Van Dick, Tenbrunsel, Pillutla, & Murnigha, 2010).
Ethical crisis due to moral errors provide a clear explanation of why economic and political failures lead to crisis. The global economic crisis is often presented as a crisis of leadership or governance in various organizations CITATION Arg12 \l 1033 (Argandoña, 2012). For example, cases of bad governance and lack of professional competence from directors, senior managers and analysts in organizations. The role of asset analysis, valuation and buying or selling decisions, were entrusted to young professionals with minimal experience. They utilized complex models and based them on very simplistic assumptions and received no criticism as there was a lack of better models CITATION Arg12 \l 1033 (Argandoña, 2012).
The superiors here did not comprehend their subordinates' approaches and exercised inadequate oversight. That is, there was no understanding of mechanisms of structured products to be combined with economic knowledge to contextualize them and management skills to run organizations that marketed them CITATION Arg12 \l 1033 (Argandoña, 2012). Such failures in the financial crisis manifested mainly in risk analysis and management that resulted to key personnel in almost all major financial institutions taking excessive risks.
Several reasons related to organizational ethic...