Q: Who Supervised AIGFP Before the OTS?

  • 2000 0616 – NYSID – Letter from Rochelle Katz, Associate Att’y, State of N.Y. Ins. Dep’t, to Bertil Lundqvist, Att’y, Skadden, Arps, Slate, Meagher & Flom, LLP (on file with the N.Y. Dept. of Ins. Gen. Counsel). / NYSID Letter to Starr International Inc.  Regarding Credit Default Option Facility – 2p
  • FCIC Interview mp3 – Greenberg (4/5)
    • State Insurance Commissioners could have, but didn’t.
  • Founded in 1987 as one of the first companies in the United States focused principally on OTC derivatives markets, AIG Financial Products Corp.  (p36)

2006 – AIG – Annual Report – 244p

  • AIG Financial Products …
  • … was a subsidiary of AIG that originated the credit default swaps that were part of AIG’s problems.
    • It was operating long before OTS had any responsibility for AIG.
  • …
  • . OTS became the regulator of AIG after the company applied for and received a federal savings bank charter in 1999.  (p58)

—  Statement of Michael E. Finn, Northeast Regional Director, Office of Thrift Supervision

2010 0526 – COP – Hearing – TARP and Other Government Assistance for AIG – [PDF-241p] — [BonkNote]

  • 8. It is not an accident, for example, that AIG’s credit default swap activities occurred outside the insurance entities.
    • Had these activities been undertaken within the insurance companies they would have been subject to capital and reserving requirements.  (p5)

2009 – JIR / NAIC – The Economic Crisis and Lessons from (and for) U.S. Insurance Regulation – Therese M. Vaughan —  18p

  • (p42-43) – Prepared Statement of John E. Parsons, Ph.D., Senior Lecturer, Sloan School of Management, Massachusetts Institute of Technology
    • The company’s London subsidiary, AIG Financial Products, had long profited on the sale of credit default swaps.
    • The deregulation of the OTC derivatives market allowed these to be sold without any up-front capital or margin.
    • The state insurance commissioners who supervised AIG’s other insurance businesses had no authority vis-a`-vis these derivatives, despite the fact that these swaps were marketed to serve a role comparable to insurance.
    • AIG’s financial regulator, the Office of Thrift Supervision, was ill equipped and completely ineffective at supervising the company’s derivative operation.

2015 0729 – GOV (House) – Dodd-Frank Turns Five: Assessing the Progress of Global Derivatives Reforms –  [PDF-106p,

  • (p50) – Before the CFMA was passed, there was uncertainty about whether or not state insurance regulators had authority over credit default swaps.
    • In June 2000, in response to a letter from the law firm of Skadden, Arps, Slate, Meagher & Flom, LLP, the New York State Insurance Department determined that “naked” credit default swaps did not count as insurance and were therefore not subject to regulation.51
    • In addition, when an insurance company sells a policy, insurance regulators require that it put aside reserves in case of a loss.  [Bonk: Monolines – MBIA / AMBAC??]

2011 01 – FCIC – Final Report of the National Commission on the Causes of the Financial and Economic Crisis in the United States – 663p