Andrew Douglas Sullivan for The New York TimesProtesters outside the offices of A.I.G.’s Financial Products unit in Wilton, Conn., in March 2009.

More than two years ago, fury over the financial crisis appeared to find a single target: an unassuming red-brick building in a suburban Connecticut office park.

There sat the headquarters of the American International Group’s Financial Products unit, largely unknown until its imploding derivatives contracts portfolio threatened to sink the global banking system. And for many on Wall Street and in Washington, Wilton, Conn., was shorthand for the excesses of the credit bubble.

But this week, A.I.G. announced with little fanfare that it had finished its “active wind-down”of the unit, having slimmed down the portfolio to just over $198 billion from a peak of $2.7 trillion. A.I.G. executives say that even more importantly, the unwinding operation — which was initially projected to cost at least $10 billion — has instead yielded a $4 billion operating profit.

“There was no real benefit to getting it right,” Robert H. Benmosche, A.I.G.’s chief executive, said in an interview on Friday from the insurer’s harbor-side offices in Jersey City. “But there would have been a lot of pain in getting it wrong.”

Daniel Acker/Bloomberg NewsGerry Pasciucco, who was in charge of winding down A.I.G.’s Financial Products unit.

Friday marked the final official working day of Gerry Pasciucco, the chief operating officer of Financial Products, known informally as F.P. A former Morgan Stanley vice chairman, he was hired in 2008 by A.I.G.’s then-chief executive, Edward Liddy, with a mandate to dismantle F.P. within a year. (Read his resignation letter.)

Much of the work involved negotiating early terminations of contracts known as credit default swaps, derivatives that had been linked to subprime mortgages that had largely soured amid the housing downturn. Rising foreclosures had eventually led to A.I.G.’s needing to post some $15 billion in collateral, prompting an unprecedented government bailout.

But according to F.P.’s calculations, a quick dismantling of the unit could have cost A.I.G. $10 billion to $20 billion, Mr. Pasciucco said in an interview.

An especially dangerous part of the portfolio was the unit’s regulatory capital book, which held derivatives that helped European banks lower the amount of capital reserves required under international accords by about $400 billion.

“This was the largest unwinding of a derivatives portfolio ever attempted, with a lot of potential second- and third-order effects,” he said.

But from the onset of A.I.G.’s bailout in September 2008, F.P. drew political fire. Among the biggest targets were about $165 million in bonuses that it was set to pay out to its employees. By March of 2009, even the White House and New York’s attorney general had attacked the payouts as untenable, as protesters trekked to the homes of F.P. executives to express their scorn.

The fight left the division’s employees demoralized and angry, according to Mr. Pasciucco, threatening F.P.’s attempts to unwind the contracts with minimal losses. He spent much of the early part of his tenure persuading staffers to stay, despite most of them facing inevitable layoffs within a year’s time.

“Gerry did a masterful job working with those people,” Mr. Benmosche said.

Ultimately, the Obama administration’s special master for compensation at bailed-out financial firms pressured A.I.G. to recover some $45 million from the division’s executives. (A.I.G. recouped only a portion of those payouts.)

At the time, the justification in paying out the bonuses was that A.I.G. was legally obligated to pay out the contracts, which critics seized upon as weak reasoning. But Mr. Benmosche said on Friday that he would have simply argued that the employees, who drew the bulk of their compensation from the bonuses, deserved them.

He added that the employees ultimately received less than what they were owed, since much of the bonuses had been deposited into deferred accounts that were later wiped out.

Many of the workers had not been involved in creating the contracts in the first place, he added.

Beyond the payouts, however, Mr. Pasciucco said unit still had a limited amount of time to handle a big undertaking. When Mr. Benmosche visited F.P. on his first official day as chief executive on Aug. 10, 2009, Mr. Pasciucco told him two things. One was that his new boss was the first A.I.G. chief executive to visit the division since Maurice R. Greenberg, who resigned from the insurer in 2005.

The other was that his current mandate left him little room to avoid losses. “Some of the bids we received were literally, ‘Give me some money to take the contract off your hands,’” Mr. Pasciucco said.

Within hours, Mr. Benmosche had changed F.P.’s mission and offered to give the team as much time as it needed to unwind the contracts with minimal losses.

That decision ran into opposition from multiple parties, notably the Federal Reserve Bank of New York, a senior lender to A.I.G. as part of the insurer’s bailout. The New York Fed’s main concern was being paid back as soon as possible, and the regulator maintained pressure as recently as the fourth quarter of last year, Mr. Benmosche said.

Jack Gutt, a spokesman for the New York Fed, declined to comment.

Mr. Benmosche and other top A.I.G. executives met with New York Fed officials every Wednesday morning to update them on F.P.’s progress.

By the end of the second quarter, however, F.P.’s portfolio consisted of about 2,200 derivative trade positions. Most of the division’s employees will either be shown the door or folded into other A.I.G. units, primarily its capital markets division.

F.P.’s office space in London has been taken over by the insurer’s asset management decision. And that red-brick office has become just another A.I.G. outpost.

As for his next step, Mr. Pasciucco said he hadn’t decided what to do, and would take a short break first.

“Know of any companies in need of fixing?” he asked with a laugh.

Resignation of A.I.G. Financial Products’ Leader

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