Q: AIGFP and AIG Securities Lending - Connected?

  • Outside of the holding co., the insurance subs have about $68B in securities lending liabilities to the 12 largest firms.
  • Program is managed by the holding company (AIG Financial Products).

2008 0912 - FCIC - 2008-09-12 Alejandro LaTorre Email to Geithner et al re Update on AIG (FRBNYAIG00509) - 2p 

  • 2008 0912 - FCIC - 2008-09-12 Alejandro LaTorre Email to Geithner et al re Update on AIG - 2p 
  • 2008 1006 - Letter - NAIC to GOV - Praeger, Waxman, Davis - [link to NAIC Page - 4p]
  • 2015 0615 - (Filed: June 15, 2015) - Starr Int'l Co. v. United States - No. 11-779C - 75p
    • Though AIG, unlike other major financial firms, had “stop[ped] writing credit protection on multi-sector CDOs” in 2005, stip. ¶ 42, its securities lending program in its Financial Products Division (“AIGFP”) still faced substantial risks from its existing CDS portfolio.7
  • Mark Hutchings (AIG) - FCIC Interview - mp3
    • [Bonk: worked for the UK Investment Arm ⇒ AIGFP??]
  • Kevin Mcginn (AIG) - FCIC Interview - mp3 
  • (p11-12) - Securities lending activities for AIG’s insurance subsidiaries were consolidated to a special unit that was not licensed as an insurance company, AIG Investments (FCIC, 2010f, 4). 
  • (p12) - For collateral, AIG Securities Lending Corporation, a division of AIG Financial Products, lent securities owned by several of the parent company’s life insurance subsidiaries to authorized borrowers (Congress, 2010, 43). 

2011 - AP - AIG: Misconceptions, Precipitating Factors in Government Bailout, and Implications for the Financial Industry, Alexis Paulovich - 56p

COP June Report

(p43) - ??? - 95 E-mail from Alejandro LaTorre to Timothy Geithner and other Federal Reserve Bank of New York officials (Sept, 14, 2008) (FRBNYAIG00496). See Section F(1)(b)(iv) for a more detailed discussion of the potential impact of AIG failure on European banks.

  • Securities Lending:
    • As of September 28, 2007, the on-loan balance totaled $91.6 billion, up from $72.5 billion as of August 31, 2006.
    • About $3.1 billion of balances represent trades with AIG companies, mostly with AIG-FP.  (p4)

2007 1023 -American International Group, Inc. Credit Risk Committee Minutes - 6p

  • 3. Report of the October 2, 2007 CRC Portfolio Review of AIG Global Securities Lending
  • Though AIG, unlike other major financial firms, had “stop[ped] writing credit protection on multi-sector CDOs” in 2005, stip. ¶ 42, its securities lending program in its Financial Products Division (“AIGFP”) still faced substantial risks from its existing CDS portfolio.7

7 At a time when AIG was exiting the CDO market, other financial firms such as Goldman Sachs, Citigroup, and Merrill Lynch were dramatically increasing their CDO transactions. From 2005 to 2006, Goldman Sachs’ CDO transactions doubled, going from $12.6 billion to $25.4 billion. Merrill Lynch tripled the size of its CDO transactions from 2005 to 2006, issuing approximately $14 billion in 2005 to $40.9 billion in 2006. Citigroup more than doubled the size of its CDO transactions going from $11.1 billion in 2005 to $28.3 billion by 2007. Cragg, Tr. 4987-89. As evidenced by a May 17, 2007 speech at the Federal Reserve Bank of Chicago, Mr. Bernanke had a favorable view of the home mortgage market two years after AIG had stopped accepting additional CDO risk. PTX 1041 at 6; Bernanke, Tr. 2142-43. (p14)

(Filed: June 15, 2015) - Starr Int'l Co. v. United States - No. 11-779C - 75p

  • AIG’s U.S. Insurance Companies are Solvent
  • The problems at AIG necessitating a Federal loan are not with its insurance subsidiaries.
    • The problems stem from the operations of AIG’s holding company, its financial products division, and its securities lending division, regulated at the Federal level by the Office of Thrift Supervision (OTS).
      • The State regulated insurance subsidiaries remain solvent and able to pay claims.
    • Throughout the liquidity crisis at the AIG holding company level, consumers remained protected by State rules preventing the holding company from simply raiding capital from its profitable and well-capitalized insurance subsidiaries. (p1-2)
  • While the AIG insurance businesses and their State regulators were not part of the problem, they will be a key part of the solution.

2008 1006 - NAIC to GOV Letter - Praeger, Waxman, Davis - [link to NAIC Page - 4p]

  • Mr. GREENBERG. Mr. Issa, what I’ve said is that 50 percent of the current earnings of their share went into FP. 

2009 0402 - GOV - THE COLLAPSE AND FEDERAL RESCUE OF AIG AND WHAT IT MEANS FOR THE U.S.

  • AIGFP ICM Model Accuracy
    • AIGFP ICM results are reasonable and conservative in measuring proxy capital requirements; however, the capital model, which Standard & Poor's (S&P) developed for financial products subsidiaries of insurance companies....  (p8)

2007 0611 - OTS - Office of Thrift Supervision Holding Company Report Of Examination of AIG  - 52p