Richard Scott – AIG

  • Richard Scott, AIG – Senior Vice President for Investment and Head of Fixed Income, the Chief Investment Officer for the Insurance Company portfolios, Securities Lending
  • FQ. 2010-06-28 D Noonan interview with Richard Scott
  • I want to touch a little bit on the market for RMBS, I think there’s been a huge amount of confusion out there.
    • The first and most important point I want to make is that within this portfolio, except for the very modest holdings of about $235 million in the RMBS CDO space, these are direct securitizations we own of the underlying hard asset, i.e. the loan itself.
    • These are not intermediated through a CDO type structure, these are direct pools, if you will, of ultimate mortgage loans

fcic-static.law.stanford.edu/cdn_media/fcic-docs/2007-12-05%20AIG%20Conference%20Call%20Transcript.pdf

  • AIG’s senior vice president of investments, Richard Scott, in whose purview securities lending fell, echoed this optimism several months later:
    • One of the clear opportunities here is that if you believe, as we do, that the AAA sector of the RMBS market is money good and if you could truly buy those securities at significant discounts, there’s a huge opportunity.
    • And there’s a bit of resistance to catching the falling knife.
    • But on the other hand, we’ve got a long-term view.
    • And if we can buy that paper at meaningful discounts to par and have high confidence that we’re going to get paid back over the next three or four years, we should be buying a lot of that.153 (p26)

2014 05 – SECURITIES LENDING AND THE UNTOLD STORY IN THE COLLAPSE OF AIG, by Hester Peirce – No. 14-12 – 82p

153 AIG December 2007 Conference Call, supra note 136, at 43 (statement of Richard Scott, Senior Vice President,
Investments, AIG).
  • No Mention
    • FINAL REPORT OF THE NATIONAL COMMISSION ON THE CAUSES OF THE FINANCIAL AND ECONOMIC CRISIS IN THE UNITED STATES – 663
      • THE FINANCIAL CRISIS INQUIRY REPORT INDEX – [20p
    • FCIC Hearings – Video -APPENDIX B: LIST OF HEARINGS AND WITNESSES – [8p
Q2 2007 Earnings Call Participants MANAGEMENT DISCUSSION … –  fcic-static.law.stanford.edu › cdn_media › fcic-docs     Aug 9, 2007 … <A – Richard Scott>: Yes. I might mention that, there is so many different facts that one might put out there. But one thing you should understand …   Fair Disc fcic-static.law.stanford.edu › cdn_media › fcic-docs Thumbnail image   Dec 5, 2007 … Richard? RICHARD SCOTT, SVP – INVESTMENTS, AMERICAN INTERNATIONAL GROUP: Thank you, Win. I’d like to introduce a couple of my …   AIG Third Quarter Earnings Conference Call fcic-static.law.stanford.edu › cdn_media › fcic-docs Thumbnail image   Nov 8, 2007 … RICHARD SCOTT, SVP INVESTMENTS, AMERICAN INTERNATIONAL GROUP, INC.: Let me comment, interest rates rose in most of the Asian …   2007 Annual Report – Financial Crisis Inquiry Commission fcic-static.law.stanford.edu › cdn_media › fcic-docs   Sep 1, 2011 … and Treasurer -. Capital Markets. Richard Scott Blackley. Senior Vice President and Capital Markets. Chief Financial Officer. Andrew Bon Salle.   Moodys Follow Up Exhibits- Rating Committee Memos for AIG –  fcic-static.law.stanford.edu › cdn_media › fcic-testimony File Format: PDF/Adobe Acrobat   Feb 9, 2006 … Richard Scott, Head of Fixed-income Investments. Teri Watson, Rating Agency Relations. Moody’s participants. Bruce Ballentine. Laura Bazer.
  • FCIC Interview – MP3
  • 1/6
  • Treasury 
  • Agic (sp) – Agent, not a principal
  • Corporate Treasurers Office
  • Corporate Treasurer? Who
  • Cash Managed by the Treasury Group
  • Role – Chief Investment Officer for the Insurance Subsidiaries
    • 98% of time to General Accounts
  • Other Names –
    • Peter Adamcyzk – ”
      • “The business was run by a guy named Peter Adamcyzk. It was his business line if you will.
      • He reported through most of this time to a guy named Rich <Mercanti> who was the head of Domestic Fixed Income after I became the head of Global Fixed Income. 
      • Then after Rich left he reported to a guy named Craig Mitchell, who was Head of Insurance Portfolio Management.”…. “and those gentlemen reported to me.”

FCIC – Hearings

  • 2008 1023 – GOV (House) – The Financial Crisis and the Role of Federal Regulators – [PDF-117p, VIDEO-CSPAN]
    • Greenspan, Cox, John Show

2009

  • 2009 1117 – FCIC – Hearing – Financial Crisis Inquiry Commission – Timothy Geithner, Secretary of the Treasury – Closed Session  —  [BonkNote]
    • [PDF-50p] 
    • AUDIO – [2009-11-17 FCIC staff audio tape of interview with Timothy Geithner, Department of the Treasury.mp3-48:48]
    • (p17) – Secretary Tim GEITHNER: — if the monoline insurance companies and AIG were not allowed to — were not able to write huge amounts of protection with no capital to back it up — when I said about capital, I meant among the regulated in the areas — if they had not been able to overwrite those commitments, it would have been a less serious crisis — a much less serious crisis.
      • And that’s just a more simple thing. It’s not about derivatives so much as being no capital to back a commitment. It doesn’t need a fancy — it’s not a fancy product or even so much oversight of derivatives.
      • It’s just the regulatory authority responsible for those institutions did not force them to hold capital against their commitments.
  • 2009 1117 – FCIC – Hearing – Financial Crisis Inquiry Commission Closed Session – Ben Bernanke, Chairman of the Federal Reserve

2010

  • 2010 0114 – FCIC – Hearing – Causes of 2008 Financial Collapse, Day 2 – [PDF-169p]
    • Federal Officials – [VIDEO-CSPAN]
      • Statement of Sheila C. Bair, Chairman, Federal Deposit Insurance Corporation : On the Causes and Current State of the Financial Crisis before the Financial Crisis Inquiry Commission – [link-54p]
    • State and Local Officials – [VIDEO-CSPAN]
  • 2010 0407 – FCIC – Hearing – 2008 Financial Crisis and Investment Banks, Day 2 – [PDF-371p]
    • Panel 1 (Hank Paulson) – [PDF-p, VIDEO-CSPAN]
  • 2010 0408 – FCIC – Hearing – Financial Crisis Inquiry Commission
    • [PDF-p, VIDEO-CSPAN]
    • Citigroup – Robert E. Rubin, Chair, Executive Committee
    • Citigroup – Charles Prince, Chairman and CEO
  • 2010 0505 – FCIC – Hearing – The Shadow Banking System – [PDF-369p]
    •  [VIDEO-CSPAN]
  • 2010 0506 – FCIC – Hearing – 2008 Financial Crisis and Investment Banks, Day 2 – The Shadow Banking System – [PDF-329p]
    • Session 1 (Hank Paulson) – [VIDEO-CSPAN]
    • Session 2 (Tim Geithner) – [VIDEO-CSPAN]
      • 2010 0810 – FCIC – Hearing – Letter – To Tim Geithner from FCIC – Thank you for testifying on May 6, 2010 in front of the Financial Crisis Inquiry Commission and agreeing to provide additional assistance.
        • Toward that end, please provide written responses to the following additional questions and any additional information by August 24, 2010.1 – 10p
        • Geithner’s Response – <WishList>
    • Session 3 () –  
  • 2010 0602 – FCIC – Hearing – Credibility of Credit Ratings, the Investment Decisions Made Based on Those Ratings, and the Financial Crisis – [PDF-510p]
    • Panel 1 – [VIDEO-CSPAN] 
    • Panel 2 – [VIDEO-CSPAN]
  • 2010 0701 – FCIC – Hearing – 2008 Financial Crisis and Derivatives, Day 2 – [PDF-313p]
    • Executives Panel – [VIDEO-CSPAN]
      • AIG and Goldman Sachs Executives
      • AIG: Bensinger, Forster, Habayeb
        • 2010 0701 – FCIC – Hearing – Testimony of Andrew Forster Before the Financial Crisis Inquiry Commission (FCIC) – 4p
      • Goldman Sachs: Viniar, David Lehman
    • Regulators Panel – [VIDEO-CSPAN]
      • Eric Dinallo (NY Insurance Regulator), Gary Gensler (CFRC), Clarence Lee (OTS)
      • 21:00 – How come we didn’t see this? – Bill Thomas (FCIC), Gensler (CFTC)
      • 37- Dinallo, Born (FCIC) –
        • Born – Some have suggested that the real problem at AIG related to the Securities Lending program.
        • 41:00 – Dinallo – AIG Companies were fully solvent, wasn’t the reason for the Bailout
        • Run on AIG Life, general economy, RMBS – Doubling down on real estate
        • Dinallo – Asset Liability Matching – Statutory Account vs Mark to Market
        • 44:00 –  Dinallo – Run, consumer lack of confidence in insurance products, liquidity problem
      • 53:00 – Wallison, Dinnallo – AIG company could do CDS because of AIG Life Rating,  Big Miss, Rating Company, 
      • 1:22 – Clarence Lee (Retired ), Keith Hennessey (FCIC)
        • Did they understand these risks? Cassano, etc
        • Probability, demands, liqudity,  understood the risks… low probability… willing to take them
        • 1:27 – Eric Dinallo – Collateral, no reserves, liquidity miscalculation, ratings downgrades
        • 1:31 – Keith Hennesey (FCIC) – AIG FP “got away” with it because they were part of the larger AIG Insurance Company.  Dinallo – Yes, I have written that. Dilapidated house example.  not really insurance
      • 1:33 – Hennessey – What would have happened if the Fed had not Bailed out AIG?
        • 1:35 – Dinallo – History, Geitner, Full blown Credit crisis, AIG Insurance Companies generally good.  AIG Asia Run – Singapore…. Could have undermined the 3rd Leg (Insurance)
      • 1:37 – Douglas J. Holtz-Eakin (FCIC) – How would this have affected Construction Bonds?
        • 1:37 – Dinallo – Problem for Insurance Companies is non-renewal of premiums.
      • 1:41 – Gensler – Mispriced.   Definition.  Underestimating and lack of preparation for bad things happening.  “underestimated risk” . Liqudity Risk, Correlation Risk, Tail Risk, Black Swan?  Credit Risk, “house of cards built on a housing bubble”, confidence was shot, if I just had more time, nobody will hand you more chips,
      • 1:47 – Peter Wallison (FCIC) – Nobody saw this coming, not even Warren Buffet. 
      • 1:57 – Dinallo – 4 buckets – Derivatives are based on those 4 buckets… there is no 5th bucket. 36 to 1 leverage. no rules
      • 1:36 – Born/ Dinallo – Deregulation, Regulators, Capital Requirements, CFMA – Told Wall Street you don’t have to reserve, unregulated, Regulation vs Enforcement, 
  • 2010 0901 – FCIC – Hearing – “Too Big to Fail”: Expectations and Impact of Extraordinary Government Intervention and The Role of Systemic Risk in the Financial Crisis – [PDF-274p]
  • 2010 0902 – FCIC – Hearing – “Too Big to Fail”: Expectations and Impact of Extraordinary Government Intervention and The Role of Systemic Risk in the Financial Crisis – [PDF-196p]

2011

  • Financial Crisis Inquiry Commission Final Report

FCIC – Financial Crisis Inquiry Commission

  • 2011 01 – FCIC – Final Report of the National Commission on the Causes of the Financial and Economic Crisis in the United States – 663p
    • fcic.law.stanford.edu/report///Index
      • Conclusions of The Financial Crisis Inquiry Commission – 14p
      • Appendix B: Life of Hearings and Witnesses – 8p
      • The Financial Crisis Inquiry Report Index – 20p
      • Dissenting Statement – Keith Hennessey, Douglas Holtz-Eakin, Bill Thomas – 29p 
      • Peter J. Wallison, Arthur F. Burns Fellow in Financial Policy Studies – American Enterprise Institute – 98p 
  • 2011 0127 – FCIC – Financial Crisis Inquiry Commission Final Report –  [VIDEO-CSPAN]
  • 2011 0216 – GOV (House) – The Final Report of the Financial Crisis Inquiry Commission 
  • 2009 0227 – Letter – NAIC to FRB (Thomas C. Baxter) – National Association of Insurance Commissioners to Thomas C. Baxter – 2p
  • LC – causeofaction.org/wp-content/uploads/2013/01/118676749-Nara-Filing-Fcic.pdf
  • 2011 04 – Leading Articles & Commentary on the Financial Crisis Inquiry Commission, Compiled by the Robert Crown Law Library – 11p
  • 2016 0311 – WSJ – Analysis of the Financial Crisis Inquiry Commission Documents Release – [link]
  • “sb-aig”
  • 2010 0830 – FCIC – Report – Preliminary Staff Report – Governmental Rescues of “Too-Big-to-Fail” Financial Institutions- 43p
    • In addition, AIG was exposed to significant losses from its securities lending operation.
      • That operation pooled investment securities held by AIG‟s life insurance subsidiaries and lent out those securities in exchange for cash collateral.
      • The securities lending operation invested that cash collateral in a variety of securities, including $45 billion of MBS. As the MBS became illiquid in 2007, AIG was unable to sell the MBS to raise the cash needed to repay its securities lending counterparties.
      • In early September 2008, counterparties demanded that AIG return $24 billion in cash, thereby aggravating AIG‟s liquidity problems.110
        • 110 COP (2010b), at 42-46.
    • The rescue of AIG raised immediate questions as to why the Fed and the Treasury decided to save AIG and not Lehman.
      • Fed chairman Bernanke addressed those questions in the following testimony he delivered at congressional hearings on September 23 and 24, 2008:
  • Insurance Commissioners – During 2008 Crisis
    • Joel Ario (PA)- Pennsylvania Insurance Commissioner
    • Eric Dinallo (NY)- New York Insurance Commissioner
    • Sandy Praeger (KS) – Kansas Commissioner of Insurance, President, NAIC
      • 2008 1006 – NAIC to GOV Letter – Praeger, Waxman, Davis – [link to NAIC Page – 4p]
        • (p1-2) – 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).
    • Doug Slape (TX) – Chief Deputy Commissioner of the Texas Department of Insurance
    • Terri Vaughan (IA) – NAIC CEO
17,391,572 100623_WORKING GROUP MTG – Derivatives.wma
41,735,060 100713 FCIC Business Meeting.wav
52,555,192 100728_FCIC Retreat_Day 1_Part 1.wma