As the value of RMBS declined, these transactions became a significant source of liquidity strain on AIG. When securities borrowing counterparties chose to terminate their securities borrowing transactions with AIG, AIG was unable to immediately dispose of the illiquid and pricedepressed RMBS as a source of repayment to securities borrowers without realizing substantial losses.
As a result, AIG had to supply cash from its own resources to repay the securities borrowing counterparties.