Few football fans watching Wayne Rooney last Saturday will have thought about the troubles engulfing the company whose name was emblazoned on his shirt. But that day AIG, once the world’s biggest insurance company, saw its shares slump by a third as traders panicked that it was running out of money.

While a week is a long time in politics, a day is even longer during a financial crisis. By yesterday, as fears about AIG’s future spread, the company that controls assets worth more than $1 trillion was facing bankruptcy. Without an emergency loan from Goldman Sachs and JPMorgan Chase of $75 billion (£42 billion), the insurance giant will have to be bailed out in some form by Washington.

AIG’s business extends far beyond Manchester United in Britain and dull house insurance policies in the US. What had been AIG’s greatest strengths – its size and its scope – may now prove to be the financial community’s biggest threat. As of the end of June AIG had sold $169 billion of bonds across the world because of its AAA stamp of approval from international credit rating agencies. Pension funds, US states and even entire countries acquired the bonds as a safe investment with modest annual returns. If AIG were to collapse, those bonds would be worthless and blow a large hole in, for example, the Wisconsin Teachers’ Pension Fund.

While the company once bragged about its astonishing global scale – today it remains the only foreign group to own an insurer outright in China – if AIG were to fail it would trigger a terrifying financial unravelling across the world. While Lehman Brothers had customers dotted around the globe, AIG, founded in Shanghai, owns substantial businesses, controlling Taiwan’s biggest insurance company and the second-biggest insurer in the Philippines among others. Most importantly, AIG has a huge financial markets business, and has big operations selling products called credit default swaps – effectively writing insurance policies against other companies’ bankruptcies.

Many regulators fear that the collapse of such a huge player in the largely unregulated $62 trillion market for these policies could cause chaos across the world.

The overreaching ambition of AIG, and to some degree, its current predicament, can be explained in three words: Maurice “Hank” Greenberg.

Mr Greenberg joined the firm in 1960 and within eight years he was running it. The firm he joined was an unimpressive mid-sized, private insurer with roots dating back to when it was founded in Shanghai in 1919. Over the next 40 years, the bad-tempered, egotistical lawyer, a friend of Henry Kissinger, transformed it into the world’s biggest insurer, expanding across Europe and Asia, underwriting business from life insurance to commercial property, providing financing for aircraft companies, and controlling multibillion-dollar pension funds.

By 2000 the stock market value of AIG hit $230 billion. Many observers couldn’t believe its success – including New York regulators, who, in 2005 began an inquiry into AIG’s books, and accused Mr Greenberg and his associates of fraud and false accounting. The accusations were dropped, but AIG substantially restated its accounts and paid $1.6 billion to settle. After the auditors first refused to sign off the accounts in 2004, Mr Greenberg quit.

Four years on Mr Greenberg remains as important an influence on the company as when he was running it. After leaving, he triggered a series of public spats over how Martin Sullivan, the former protégé who succeeded him, was steering the group. There were also rows about pay. Mr Sullivan was perceived by Wall Street as weak, and was accused of being reluctant to fire executives and nervous of unpicking any part of Mr Greenberg’s empire. He, too, quit this year.

While Mr Sullivan sought to patch up relations with regulators and fend off attacks from Mr Greenberg, a crisis was developing under his nose. In the late 1980s he had approved AIG moving into a new area: selling types of insurance linked to sub-prime mortgages. Companies around the world began to use AIG’s policies to manage their exposure to investments backed by sub-prime. However, as sub-prime borrowers began to default, investors started to fret and regulators started asking questions.

The insurer began to lose money fast. During the first six months of this year, AIG lost $13 billion – almost as much as it made in the whole of 2006.

At the end of last year, Mr Sullivan sought to calm investors’ fears and invited shareholders to “ask as many questions as you like”. They may have a new one now: “Does AIG have a future?”

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