• (p8) - David Herzog, AIG Senior Vice President and Comptroller, then joined the meeting.
  • Mr. Herzog explained AIG's immediate liquidity needs.
  • He stated that AIG had used $10 billion to $11 billion through the securities lending program and was still approximately $4.5 billion short in that program.
  • Mr. Herzog explained that the securities lending program resides in the operating insurance companies, which are state regulated. 
  • The regulators made clear that if AIG made use of insurance company assets to pay the securities lending liabilities without the permission of the regulators, the regulators would seize the insurance companies.
  • Mr. Herzog then explained that because AIG did not have sufficient funds to pay the liabilities that would come due tomorrow, if AIG does not obtain a loan to provide funds for the next day, the securities lending program will go into default.
  • Because the securities lending liabilities reside at the individual insurance company level, that would cause the insurance companies to be in default and the regulators would likely seize the insurance companies. 

2008 0916 - AIG Board of Directors Minutes - 24p