AIG, MetLife Agree on $15.5 Billion Deal for Asian Life Insurer
March 8, 2010 – Officials for taxpayer-rescued American International Group (AIG) today announced they have finalized a $15.5 billion deal to sell the insurer’s Asia-based life insurance subsidiary to MetLife.
The deal for AIG’s American Life Insurance Company, popularly called “Alico,” is the second major sale announced by AIG officials during the past week and means the two transactions combined will allow the insurer to pay down about $51 billion of its remaining $102 billion in debt remaining from AIG’s $182.5 billion, taxpayer-backed federal debt. AIG last week announced a $35.5 billion deal to sell its American International Assurance firm to Prudential.
Initially planned to be concluded by the end of February, the deal for Alico was put on hold while MetLife officials look into potential federal tax issues related to how Alico conducts its business overseas. Headquartered in Delaware but primarily doing business in Asia, Alico officials routinely withhold federal taxes from life insurance distributions made to its U.S.-based customers. But because Alico does most of its business overseas, the firm does not withhold federal taxes from distributions to non-U.S. citizens living in other nations.
Concerned U.S. officials might take exception to Alico’s tax-withholding methods, officials for MetLife and AIG are seeking a clarification on the matter from the U.S. Internal Revenue Service. Company officials say the request for a clarification from federal officials is more of a formality and likely won’t delay the potential sale occurring by the end of the month. Selling Alico for $15.5 billion would be the second-largest transaction done by AIG as company officials attempt to repay its staggering debt to U.S. taxpayers.
Alico mostly does business overseas in 50 nations and is one of the largest life insurance companies in lucrative, emerging Asian markets. Industry analysts say $15.5 billion is a large amount to pay for a company valued at about $4 billion in 2008, but Alico has a large share of lucrative emerging life insurance markets in China and other parts of Asia.
The deal means the Federal Reserve Bank of New York would get about $9 billion as partial reimbursement for the taxpayer-funded bailout of the nearly bankrupted insurer in 2008. AIG would retain the remaining $6 billion. The $9 billion would be used to buy back preferred shares of AIG stock the federal government owns as collateral for rescuing the ailing insurer in 2008.
Formerly the world’s largest insurance company, AIG became the world’s most indebted insurer after federal officials last year agreed to extend the company an $85 billion loan in exchange for an 80 percent share of company stocks. Federal officials said allowing AIG to go bankrupt would have a devastating impact on U.S. and international financial markets and later revised lending terms, making it a $153 billion loan with a lower interest rate and longer repayment period.
Report: AIG to get $35.5 Billion for Asia-based Subsidiary
March 2, 2010 – Officials for struggling insurer American International Group (AIG) are close to securing $35.5 billion for a lucrative Asia-based life insurance company from England-based Prudential.
The board of directors for AIG on Sunday reportedly approved selling Asia-based American International Assurance (AIA), but final terms are yet to be agreed upon. A preliminary agreement has Prudential officials paying $25 billion in cash with another $10.5 billion in securities, Reuters reported on March 1.
Based in Hong Kong, AIA has been in business more than 90 years and is one of the largest insurers in Asia with more than $60 billion in assets and about 20 million policyholders. AIG officials earlier weighed an initial public offering of AIA shares on the Hong Kong stock exchange when initial interest in purchasing the company was light during tightened global credit markets. Purchasing AIG makes Prudential one of the largest insurance companies in the Asian market, and company officials plan to finance about $20 billion through agreements with JPMorgan Chase & Co., Credit Suisse and HSBC, according to Reuters.
AIG officials would pay about $16 billion to the Federal Reserve Bank of New York as partial restitution of the massive debt AIG owes U.S. taxpayers. AIG currently owes about $25 billion to the Federal Reserve Bank of New York and another $45 billion in preferred AIG shares held by the federal government as collateral. AIG also is in talks with MetLife officials to sell its Asia-based American Life Insurance Company (Alico) for about $15.5 billion, from which the federal government reportedly would be paid about $9 billion toward AIG’s debt.
Formerly the world’s largest insurance company, AIG became the world’s most indebted insurer after federal officials in September 2008 agreed to extend the company an $85 billion loan in exchange for an 80 percent share of company stocks. Federal officials said allowing AIG to go bankrupt would have a devastating impact on U.S. and international financial markets and later revised lending terms, making it a $153 billion loan with a lower interest rate and longer repayment period.
Under a later revision, the Federal Reserve provided AIG $60 billion in loans and the U.S. Treasury another $40 billion so company officials could buy up preferred stock. Federal officials also approved $53 billion to purchase the company’s risky mortgage-backed assets and other debt contracts. The latest bailout adjustment boosted to nearly $183 billion the total amount available to AIG officials.
AIG is attempting to sell off its overseas life insurance units and other subsidiaries to repay its debt and has raised nearly $12 billion through sales of subsidiary units and other assets. Company officials intend to focus future business on property and casualty insurance markets and maintain a minority financial interest in some profitable overseas ventures.
Federal Tax Issue Puts Brakes on AIG, MetLife Deal
Feb. 18, 2010 – A $15 billion deal for the sale of a leading Asia-based insurance company being negotiated between MetLife and American International Group (AIG) officials has hit a tax-related obstacle.
Initially planned to be concluded by the end of February, the deal for AIG’s subsidiary American Life Insurance Company, popularly known as “Alico,” has been puts on hold while MetLife officials look into potential federal tax issues related to how Alico conducts its business overseas. Headquartered in Delaware but primarily doing business in Asia, Alico officials routinely withhold federal taxes from life insurance distributions made to its U.S.-based customers. But because Alico does most of its business overseas, the firm does not withhold federal taxes from distributions to non-U.S. citizens living in other nations.
Concerned U.S. officials might take umbrage at Alico’s practice, officials for MetLife and AIG are seeking a clarification on the matter from the U.S. Internal Revenue Service, Reuters reported yesterday. Company officials say the request for a clarification from federal officials is more of a formality and likely won’t delay the potential sale occurring by the end of the month. Selling Alico for $15 billion would be the largest single transaction done by AIG as company officials attempt to repay its staggering debt to U.S. taxpayers.
Alico mostly does business overseas in 50 nations and is one of the largest life insurance companies in lucrative, emerging Asian markets. Industry analysts say $15 billion would be a large amount to pay for a company valued at about $4 billion in 2008, but Alico has a large share of lucrative emerging life insurance markets in China and other parts of Asia. If MetLife does purchase Alico from AIG, the Federal Reserve Bank of New York would get about $9 billion as partial reimbursement for the taxpayer-funded bailout of the nearly bankrupted insurer in 2008. AIG would retain the remaining $6 billion.
The $9 billion would be used to buy back preferred shares of AIG stock that the federal government received as collateral for rescuing the ailing insurer in 2008. AIG officials also would allocate $16 billion to the Federal Reserve Bank of New York from the proceeds from the expected initial public offering of AIG’s Asian-based life insurance unit, American International Assurance (AIA), on the Hong Kong stock exchange later this year.
Formerly the world’s largest insurance company, AIG became the world’s most indebted insurer after federal officials last year agreed to extend the company an $85 billion loan in exchange for an 80 percent share of company stocks. Federal officials said allowing AIG to go bankrupt would have a devastating impact on U.S. and international financial markets and later revised lending terms, making it a $153 billion loan with a lower interest rate and longer repayment period.
Under the new plan, the Federal Reserve provided AIG $60 billion in loans and the U.S. Treasury another $40 billion so company officials could buy up preferred stock. Federal officials also approved $53 billion to purchase the company’s risky mortgage-backed assets and other debt contracts.
MetLife, AIG Officials Mulling Terms for Asian Life Insurance Unit
Feb. 11, 2010 – Apparently having reached a tentative selling price of about $15 billion to acquire Asian-based American Life Insurance Company (Alico) from the American International Group (AIG), MetLife officials reportedly are offering about $8 billion in company shares as partial compensation.
Several news reports indicate MetLife officials want to give AIG a combination of common and preferred shares of MetLife stock totaling about $8 billion with the rest paid in cash. MetLife has access to about $5 billion in financing from several large international banks, including the Bank of America, JPMorgan Chase, Credit Suisse and Deutsche Bank, Bloomberg News reported.
MetLife officials view AIG’s Alico subsidiary as a good way to gain a large share of the growing Asian life insurance market. But several credit ratings firms have warned a deal weakening MetLife’s financials would result in credit downgrades for the life insurer. MetLife officials contend they only would complete a transaction beneficial for the company and its shareholders.
“Because MetLife is financially strong and has a deep management team, we are in a very good position to pursue acquisitions that are strategic and would accelerate our long-term growth,” company chairman C. Robert Henrikson said last week. “If we reach an agreement, it will be because the transaction meets our criteria for acquisitions, including having the potential to generate long-term value for both shareholders and customers.”
Although headquartered in the United States, Alico primarily does its business overseas in 50 nations and is one of the largest life insurance companies in lucrative, emerging Asian markets. A deal likely will be finalized by the end of February, according to recent reports in the Wall Street Journal and New York Times.
AIG’s current top executive, Robert Benmosche, previously was the chief executive officer for MetLife. Benmosche has said he would not use his former position at MetLife to AIG’s advantage, but MetLife is one of the few companies with sufficient assets to obtain the capital necessary for such a large transaction. Industry analysts say $15 billion would be a large amount to pay for a company valued at about $4 billion in 2008, but Alico has a large share of lucrative emerging life insurance markets in China and other parts of Asia.
If MetLife does purchase Alico from AIG, the Federal Reserve Bank of New York would get about $9 billion as partial reimbursement for the taxpayer-funded bailout of the nearly bankrupted insurer in 2008. AIG would retain the remaining $6 billion.
The $9 billion would be used to buy back preferred shares of AIG stock that the federal government received as collateral for rescuing the ailing insurer in 2008. AIG officials also would allocate $16 billion to the Federal Reserve Bank of New York from the proceeds from the expected initial public offering of AIG’s Asian-based life insurance unit, American International Assurance (AIA), on the Hong Kong stock exchange later this year.
Obama’s ‘Pay Czar’ Says No More AIG Bonuses after $100 Million Payout
Feb. 3, 2010 – About 200 employees at an embattled subsidiary of taxpayer-rescued American International Group (AIG) will get a total $100 million in bonus pay this month, but President Barack Obama’s Pay Czar says there will be no more bonuses afterward.
The $100 million in schedule bonus payments is less than the 200 employees of AIG Financial Products contractually were guaranteed in 2007 – before AIG nearly went bankrupt and the U.S. economy collapsed a year later. AIG Financial Products crippled AIG through exposure to more than $62 billion in mortgage-backed “collateralized debt obligations” tied to the U.S. housing market. AIG essentially insured large lenders against mortgage defaults and owed tens of billions of dollars after the U.S. housing market crashed and banks began foreclosing on defaulted mortgages in 2008.
Kenneth Feinberg, Obama’s “Pay Czar” today told ABC’s “Good Morning America” show hosts the payouts are the last of contractually guaranteed bonuses for employees remaining at AIG Financial Products. Because the bonuses contractually are guaranteed, federal officials are powerless to stop them, Feinberg said. But no more bonus pay contracts are in place.
“It ends this March with the last of these retention payments. These are the old grandfathered payments,” Feinberg said today on “Good Morning America.” “Another month or so [and] these old, guaranteed bonuses will be a thing of the past.”
The majority of employees at AIG Financial Products recently agreed to accept up to 10 percent less in retention payment bonuses if it means collecting the money sooner. About 95 percent of employees at AIG Financial Products reportedly agreed to the reduction in bonus payments, and some suggested even deeper cuts. If implemented, AIG would save about $13 million.
Company officials sought a $26 million reduction in bonus payments, particularly in light of an angry backlash by U.S. taxpayers upon first learning of the scheduled bonus payments in early 2009.
AIG officials in federal filings last year indicated the insurer would pay more than $1 billion in employee retention payments and bonuses to high-level executives and managers at various units. Company officials have defended the bonuses as necessary to retain key employees with years of institutional knowledge at subsidiary units being sold by the insurer to repay its debt to U.S. taxpayers. The bonus payments help retain key staff and make the units more attractive to potential buyers, according to AIG’s former chief executive, Edward Liddy.
Particularly infuriating to U.S. taxpayers, several federal officials became embroiled in a scandal last year over $165 million in bonus payments AIG paid its employees after U.S. Senator Chris Dodd (D-Connecticut) successfully amended legislation ensuring the retention bonuses would be paid to employees at the same unit responsible for AIG’s demise.
Dodd initially denied any role in the matter until proven otherwise. He then blamed President Barack Obama’s administration, claiming White House officials demanded the bonus payments be protected. Dodd and Obama are among the largest recipients of campaign contributions from AIG executives in recent years.
To help quell the subsequent public outrage, Obama eventually appointed Feinberg as the federal “Pay Czar” in charge of reviewing executive bonus payments at companies accepting federal assistance.
Report: AIG Employees Accept Partial Cut in Bonus Pay
Jan. 29, 2010 – Having experienced the angry backlash of American taxpayers once before, employees at the subsidiary largely responsible for crippling bailed-out insurer American International Group (AIG) agreed to a partial reduction in controversial retention pay bonuses.
The majority of employees at AIG Financial Products agreed to accept up to 10 percent less in retention payment bonuses if it means collecting the money sooner, Reuters reported yesterday. AIG Financial Products is the subsidiary unit largely responsible for crippling AIG after exposing the insurance giant to massive debt through high-risk securities tied to various mortgage markets. When people began defaulting on their mortgages, AIG’s trading partners demanded compensation through their trading agreements with the insurance giant, which essentially insured banks against defaults on risky mortgage loans.
About 95 percent of employees at AIG Financial Products reportedly agreed to the reduction in bonus payments, and some suggested even deeper cuts, according to Reuters. If implemented, AIG would save about $13 million. Company officials sought a $26 million reduction in bonus payments, particularly in light of an angry backlash by U.S. taxpayers upon learning of the scheduled bonus payments in early 2009.
AIG officials in federal filings last year indicated the insurer would pay more than $1 billion in employee retention payments and bonuses to high-level executives and managers at various units. Company officials have defended the bonuses as necessary to retain key employees with years of institutional knowledge at subsidiary units being sold by the insurer to repay its debt to U.S. taxpayers. The bonus payments help retain key staff and make the units more attractive to potential buyers, according to AIG’s former chief executive, Edward Liddy.
Particularly infuriating to U.S. taxpayers, several federal officials became embroiled in a scandal last year over $165 million in bonus payments AIG paid its employees after U.S. Senator Chris Dodd (D-Connecticut) successfully amended legislation ensuring the retention bonuses would be paid to employees at the same unit responsible for AIG’s demise.
Dodd initially denied any role in the matter until proven otherwise. He then blamed President Barack Obama’s administration, claiming White House officials demanded the bonus payments be protected. Dodd and Obama are among the largest recipients of campaign contributions from AIG executives in recent years.
To help quell the subsequent public outrage, Obama eventually appointed Kenneth Feinberg as the federal “compensation czar” in charge of reviewing executive bonus payments at companies accepting federal assistance.
Geithner Defends AIG Bailout Before Congressional Panel
Jan. 27, 2010 – Federal lawmakers today accused officials at the Federal Reserve Bank of New York and others of misleading U.S. taxpayers into funneling money into ailing insurer American International Group (AIG) when several large banks were the actual intended beneficiaries.
The accusations were made as a Congressional panel today held its first hearing investigating why federal officials attempted to prevent U.S. taxpayers from knowing how their tax dollars truly were being allocated and why.
“In effect, the taxpayers were propping up the hollow shell of AIG by stuffing it with money, and the rest of Wall Street came by and looted the corpse,” Rep. Edolphus Towns (D – New York) said upon opening today’s Congressional hearing.
Through two special entities created to oversee the handling and distribution of some $62 billion in taxpayer “bailout” funds intended for AIG, officials for the Federal Reserve Bank of New York instead paid several banking partners in full on mortgage-backed securities agreements that crippled the insurer when the U.S. mortgage market collapsed in 2008. Because taxpayers were told their funds were intended to prop up AIG and prevent further credit ratings downgrades that would have bankrupted the insurance giant, members of Congress are investigating why the $62 billion was paid to AIG’s banking partners and why federal officials attempted to hide it from U.S. taxpayers.
U.S. Treasury Secretary Timothy Geithner was the president of the Federal Reserve Bank of New York at the time, although he says he recused himself from the matter after being appointed Treasury Secretary by President-elect Barack Obama soon after his November 2008 election win. He appeared before the House Committee on Oversight and Government Reform hearing today.
Committee members want to know why officials for the Federal Reserve Bank of New York and AIG in 2008 had requested the heightened security status for an important document showing how the taxpayer funds would be allocated. Both parties sought “special security procedures” by the U.S. Securities and Exchange Commission for an important document relating to the AIG bailout. The document, entitled “Schedule A – List of Derivative Transactions,” showed which financial firms would receive how much money through the taxpayer-funded bailout.
SEC regulators complied with the request by the Federal Reserve Bank of New York and treated the matter like one of national security, according to the Reuters report. Only two SEC officials reviewed the document in January 2009 and afterward locked it in a safe while considering the confidentiality request, according to the e-mail messages obtained by Reuters.
Among information federal and AIG officials sought to keep secret were the 16 banks in the United States and Europe receiving money through the AIG bailout. The banks later were identified only after AIG officials were pressured to do so by the SEC and members of Congress. Because large banks like Goldman Sachs, Deutsche Bank and Societe Generale received full restitution for debts owed to them by AIG, critics have said the AIG bailout in fact was designed to bailout the insurer’s banking and trading partners without letting U.S. taxpayers know. Some $70 billion of the nearly $183 billion AIG bailout went to the 16 banks.
But Geithner denies any wrongdoing by him or officials at the Federal Reserve Bank of New York.
“We did not act to protect the financial interests of individual institutions. We did not act to help foreign banks,” Geithner said in his prepared remarks for today’s Congressional hearing.
Geithner said he was not involved in the decision-making process regarding the bailout and claimed “thousands of factories” would have closed and “millions of Americans” would have lost their jobs, leading to the “utter collapse” of the U.S. economy had the federal government not intervened in the AIG crisis.
Federal Reserve Chairman Ben Bernanke and former U.S. Treasury Secretary Henry Paulson also testified before the committee. Paulson was Treasury Secretary during the end of 2008 and is the former chief executive officer for Goldman Sachs.
Despite their assertion that the bailout was necessary and payments to AIG’s banking partners were fully justified, the special inspector general for the Troubled Asset Relief Program (TARP), Neil Barofsky, said a better deal could have been negotiated and saved U.S. taxpayers’ money. Instead, federal officials intentionally allowed banks to collect billions of dollars in funds intended to increase AIG’s liquid capital and prevent additional credit ratings downgrades that would have generated even greater debt for the ailing insurance giant.
Report: Federal Officials Sought National Security Status for AIG Info
Jan. 25, 2010 – Even as U.S. taxpayers involuntarily were forking over an initial $85 billion to prevent a pending bankruptcy by insurer American International Group (AIG), federal officials attempted to gain national security status on some transactions and prevent the public from knowing how their tax dollars were being allocated, according to a Jan. 24 Reuters report.
E-mails obtained by Reuters indicate officials for the Federal Reserve Bank of New York and AIG in 2008 had requested the heightened security status for an important document showing how the taxpayer funds would be allocated. Both parties sought “special security procedures” by the U.S. Securities and Exchange Commission for an important document relating to the AIG bailout. The document is entitled “Schedule A – List of Derivative Transactions” and showed which financial firms would receive how much money through the taxpayer-funded bailout.
U.S. Treasury Secretary Timothy Geithner was president of the Federal Reserve Bank of New York in 2008 but has denied any wrongdoing in the matter. Geithner says he recused himself from any discussions while awaiting his eventual confirmation as President Barack Obama’s U.S. Treasury Secretary appointee.
SEC regulators complied with the request by the Federal Reserve Bank of New York and treated the matter like one of national security, according to the Reuters report. Only two SEC officials reviewed the document in January 2009 and afterward locked it in a safe while considering the confidentiality request, according to the e-mail messages obtained by Reuters.
Among information federal and AIG officials sought to keep secret were the 16 banks in the United States and Europe receiving money through the AIG bailout. The banks later were identified only after AIG officials were pressured to do so by the SEC and members of Congress. Because large banks like Goldman Sachs, Deutsche Bank and Societe Generale received full restitution for debts owed to them by AIG, critics have said the AIG bailout in fact was designed to bailout the insurer’s banking and trading partners without letting U.S. taxpayers know. Some $70 billion of the nearly $183 billion AIG bailout went to the 16 banks.
Geithner is scheduled to testify before a Congressional committee on Jan. 27 as to whether or not he had any knowledge of or played a role in negotiating a full settlement amount for AIG’s banking partners and then hiding the details from U.S. taxpayers. Several lawmakers recently have accused Geithner of orchestrating full payments for AIG’s banking partners during the fall and winter of 2008 when he was president of the Federal Reserve Bank of New York.
Congressman Darrell Issa (R-California) recently released copies of e-mails indicating Federal Reserve officials actively sought to keep U.S. taxpayers from knowing about efforts to fully reimburse banks with contractual business ties to AIG. But a Jan. 8 letter to Issa from the Federal Reserve Bank of New York’s general counsel, Thomas Baxter, suggests lower-level employees kept Geithner out of the loop regarding negotiations and settlement amounts.
Issa suggested the letter from Baxter confirms Federal Reserve Bank officials already knew Geithner’s position on the matter and carried out his will.
AIG fully reimbursed the Goldman Sachs Group and other banking partners on high-risk credit default swaps tied to various mortgage markets after receiving its initial $85 billion taxpayer bailout. But instead of revealing the extent of payments to banks, Federal Reserve officials sought to keep them hidden from the public, Issa contends.
New York Federal Reserve officials negotiated the payments to banks, which was some $13 billion more than the settlement AIG officials attempted to negotiate. Issa suggested Geithner used the AIG bailout as a “backdoor” bailout for banks without taxpayers knowing.
Formerly the world’s largest insurance company, AIG became the world’s most indebted insurer after federal officials in September 2008 agreed to extend the company an $85 billion loan in exchange for an 80 percent share of company stocks. Federal officials said allowing AIG to go bankrupt would have a devastating impact on U.S. and international financial markets and later revised lending terms, making it a $153 billion loan with a lower interest rate and longer repayment period.
Fed Gets $9 Billion if MetLife Buys AIG Subsidiary
Jan. 21, 2010 – Reports of a pending sale of a lucrative, Asian-based life insurance unit to MetLife by the American International Group (AIG) could mean U.S. taxpayers will recoup up to $9 billion of their involuntary rescue of the nearly bankrupted insurance giant.
Several recent news reports claim AIG nearly has secured a deal to sell its Delaware-based Alico life insurance unit to MetLife for up to $15 billion. Although headquartered in the United States, the American Life Insurance Company (Alico) primarily does its business overseas in 50 nations and is one of the largest life insurance companies in lucrative, emerging Asian markets. A deal likely will be finalized by the end of February, according to recent reports in the Wall Street Journal and New York Times.
AIG’s current top executive, Robert Benmosche, previously was the chief executive officer for MetLife. Benmosche has said he would not use his former position at MetLife to AIG’s advantage, but MetLife is one of the few companies with sufficient assets to obtain the capital necessary for such a large transaction. Industry analysts say $15 billion would be a large amount to pay for a company valued at about $4 billion in 2008, but Alico has a large share of lucrative emerging life insurance markets in China and other parts of Asia.
If MetLife does purchase Alico from AIG, the Federal Reserve Bank of New York would get about $9 billion as partial reimbursement for the taxpayer-funded bailout of the nearly bankrupted insurer in 2008. AIG would retain the remaining $6 billion.
The $9 billion would be used to buy back preferred shares of AIG stock that the federal government received as collateral for rescuing the ailing insurer in 2008. AIG officials also would allocate $16 billion to the Federal Reserve Bank of New York from the proceeds from the expected initial public offering of AIG’s Asian-based life insurance unit, American International Assurance (AIA), on the Hong Kong stock exchange later this year.
Formerly the world’s largest insurance company, AIG became the world’s most indebted insurer after federal officials last year agreed to extend the company an $85 billion loan in exchange for an 80 percent share of company stocks. Federal officials said allowing AIG to go bankrupt would have a devastating impact on U.S. and international financial markets and later revised lending terms, making it a $153 billion loan with a lower interest rate and longer repayment period.
Under the new plan, the Federal Reserve provided AIG $60 billion in loans and the U.S. Treasury another $40 billion so company officials could buy up preferred stock. Federal officials also approved $53 billion to purchase the company’s risky mortgage-backed assets and other debt contracts.
AIG is attempting to sell off its overseas life insurance units and other subsidiaries to repay up to $60 billion in loans this year. Company officials intend to focus future business on property and casualty insurance markets and maintain a minority financial interest in some profitable overseas ventures.
AIG, Other Insurers Among Firms to Pay Proposed $90 Billion Tax
Jan. 18, 2010 – President Barack Obama last week announced a plan to implement a federal tax on large financial firms with at least $50 billion in assets and who accepted federal funding to survive the recent financial crisis – although some who declined taxpayer dollars would pay, too.
Corporations responsible for paying the proposed tax would include the American International Group (AIG), the Bank of America, Citigroup, Goldman Sachs and JP Morgan Chase. The tax would be levied over a 10-year period beginning June 30 and accrue an estimated $90 billion over a decade.
President Obama calls the proposed tax the “financial crisis responsibility fee,” which is designed to recoup much of an estimated $117 billion U.S. taxpayers have lost through the federal Troubled Asset Relief Program (TARP), which is a $700 billion fund created in 2008 to relieve ailing corporations like AIG of toxic assets mostly tied to various mortgage markets and largely blamed for the global economic meltdown over the past year. Federal law requires the President to recoup any TARP program funding losses by 2013.
Obama says the proposed tax would recoup lost taxpayer dollars by making only those firms most responsible for the recent downturn and who were primary recipients of taxpayer dollars repay the funds instead of adding to the federal deficit. The tax would levy a 0.15 percent fee on corporate assets while exempting “high-quality capital,” such as common shares, and retained and disclosed corporate earnings. If approved by Congress and signed into law, the Internal Revenue Service would collect the fee over a 10-year period beginning June 30. Only those firms with assets topping $50 billion and who own federally insured depository institutions would be levied.
While AIG was among firms cited as being liable for the proposed federal tax, several other insurance companies also would qualify for the additional levy. Allstate, Ameriprise Financial, The Hartford Financial Services Group, Lincoln National, MetLife, the Principal Financial Group and Prudential Financial all would be eligible for the proposed tax based on each firm’s adjusted assets even though many declined federal assistance, according to a report issued by Credit Suisse on Friday.
Of insurers that accepted federal TARP funds, AIG could owe up to $389 million if the tax is levied. The Hartford would owe about $28.2 million and Lincoln National $29.4 million, according to Credit Suisse.
But firms that declined federal assistance would pay large amounts as well. MetLife would be assessed up to $97 million, Prudential about $85 million and Allstate some $34 million despite none of the insurers having accepted taxpayer assistance, according to Credit Suisse and Citigroup analysts.
Geithner to Testify About AIG Bank Payments
Jan. 14, 2010 – U.S. Treasury Secretary Timothy Geithner on Jan. 27 is scheduled to testify before the House Oversight and Government Reform Committee regarding rescued insurer American International Group’s (AIG) payments to its banking partners after securing taxpayer funds in the winter of 2008 and efforts to conceal them from the public.
Geithner, then the head of the Federal Reserve Bank of New York, has come under fire in recent weeks for the Federal Reserve’s role in covering up payments made by AIG to its banking trading partners after securing an initial $85 billion, taxpayer-funded rescue package that since has ballooned to a nearly $183 billion bailout of the ailing insurance giant.
U.S. Representative Ed Towns (D-New York) today announced Geithner has agreed to testify before the House committee, which he chairs. Towns announced the hearing last week after fellow lawmakers from both sides of the aisle began pressuring Geithner for more information on the Federal Reserve Bank of New York’s role in preventing public disclosure of payments made by AIG to its trading partners on high-risk securities that nearly bankrupted the former insurance giant.
“More than one year after the first federal bailout of AIG, the American people continue to question where their tax dollars were really sent when the government rescued this company,” Towns said upon announcing the hearing date last week.
Geithner agreed to testify after being pressured by several federal lawmakers from both sides of the aisle. Officials for the Federal Reserve Bank of New York last week said Geithner was not privy to discussions regarding AIG payments to banks and had recused himself after being appointed U.S. Treasury Secretary in late 2008.
But federal lawmakers want Geithner to testify as to whether or not he had any knowledge of or played a role in negotiating a full settlement amount for AIG’s banking partners and then hiding the details from U.S. taxpayers. Geithner was the president of the Federal Reserve Bank of New York until President Barack Obama appointed him U.S. Treasury Secretary in December 2008. Several lawmakers recently have accused Geithner of orchestrating full payments for AIG’s banking partners during the fall and winter of 2008 when he was president of the Federal Reserve Bank of New York.
Congressman Darrell Issa (R-California) recently released copies of e-mails indicating Federal Reserve officials actively sought to keep U.S. taxpayers from knowing about efforts to fully reimburse banks with contractual business ties to AIG. But a Jan. 8 letter to Issa from the Federal Reserve Bank of New York’s general counsel, Thomas Baxter, suggests lower-level employees kept Geithner out of the loop regarding negotiations and settlement amounts.
Issa suggested the letter from Baxter confirms Federal Reserve Bank officials already knew Geithner’s position on the matter and carried out his will.
AIG paid more than $62 billion to fully reimburse the Goldman Sachs Group and other banking partners on high-risk credit default swaps tied to various mortgage markets after receiving its initial $85 billion taxpayer bailout. But instead of revealing the extent of payments to banks, Federal Reserve officials sought to keep them hidden from the public, Issa contends.
New York Federal Reserve officials negotiated the payments to banks, which was some $13 billion more than the settlement AIG officials attempted to negotiate. Issa suggested Geithner used the AIG bailout as a “backdoor” bailout for banks without taxpayers knowing.
Formerly the world’s largest insurance company, AIG became the world’s most indebted insurer after federal officials in September 2008 agreed to extend the company an $85 billion loan in exchange for an 80 percent share of company stocks. Federal officials said allowing AIG to go bankrupt would have a devastating impact on U.S. and international financial markets and later revised lending terms, making it a $153 billion loan with a lower interest rate and longer repayment period.
Bunning Pressing for SEC Probe of AIG Bank Payments
Jan. 12, 2010 – U.S. Senator Jim Bunning has joined a growing chorus of lawmakers calling for a federal investigation into potential law violations regarding the roles officials for the Federal Reserve Bank of New York might have played in securing full reimbursement for ailing insurers American International Group’s (AIG) banking partners and then hiding the transactions for U.S. taxpayers.
U.S. Senator Jim Bunning (R-Kentucky) is a member of the Senate Banking Committee and yesterday wrote U.S. Securities and Exchange Committee Chairwoman Mary Schapiro requesting a federal investigation into the matter.
“Because the information withheld appears to be material information about the financial condition of AIG and the value of the company, these actions may constitute a serious violation of the securities laws,” Bunning said his letter to Schapiro. Bunning also suggested the secretive actions by Federal Reserve Bank of New York officials “are likely to have caused and continue to cause losses to private investors and undermine the credibility of the U.S. financial and securities markets.”
Bunning joins other federal lawmakers calling for an investigation into the matter and whether or not U.S. Treasury Secretary Timothy Geithner, then president of the Federal Reserve Bank of New York, had any knowledge of or played a role in negotiating a full settlement amount for AIG’s banking partners and then hiding the details from U.S. taxpayers. Geithner was the president of the Federal Reserve Bank of New York until President Barack Obama appointed him U.S. Treasury Secretary in December 2008. But several federal lawmakers during the past week have accused Geithner of orchestrating full payments for AIG’s banking partners during the fall and winter of 2008, when Geithner was the president of the Federal Reserve Bank of New York.
Congressman Darrell Issa (R-California) last week released copies of e-mails indicating Federal Reserve officials actively sought to keep U.S. taxpayers from knowing about efforts to fully reimburse banks with contractual business ties to AIG. But a Jan. 8 letter to Issa from the Federal Reserve Bank of New York’s general counsel, Thomas Baxter, suggests lower-level employees kept Geithner out of the loop regarding negotiations and settlement amounts.
Geithner has denied having any role in the controversial negotiations between AIG officials and representatives of banking giants Goldman Sachs, Deutsche Bank and Societe Generale. But Issa suggested the letter from Baxter confirms Federal Reserve Bank officials already knew Geithner’s position on the matter and carried out his will.
Congressman Spencer Bachus (R-Alabama) and Congressman Elijah Cummings (D-Maryland), last week requested Geithner appear before the House committees on which they serve to explain how AIG’s banking partners received 100 cents on the dollar for high-risk, mortgage-backed securities known as credit default swaps, which crippled AIG and would have bankrupted the insurer had it not received nearly $183 billion in involuntary aid from U.S. taxpayers.
AIG paid more than $62 billion to fully reimburse the Goldman Sachs Group and other banking partners on high-risk credit default swaps tied to various mortgage markets after receiving its initial $85 billion taxpayer bailout. But instead of revealing the extent of payments to banks, Federal Reserve officials sought to keep them hidden from the public, Issa contends.
New York Federal Reserve officials negotiated the payments to banks, which was some $13 billion more than the settlement AIG officials attempted to negotiate. Issa suggested Geithner used the AIG bailout as a “backdoor” bailout for banks without taxpayers knowing.
Formerly the world’s largest insurance company, AIG became the world’s most indebted insurer after federal officials in September 2008 agreed to extend the company an $85 billion loan in exchange for an 80 percent share of company stocks. Federal officials said allowing AIG to go bankrupt would have a devastating impact on U.S. and international financial markets and later revised lending terms, making it a $153 billion loan with a lower interest rate and longer repayment period.
Fed: Geithner Not Privy to AIG Payout Information
Jan. 11, 2010 – Legal counsel for the Federal Reserve Bank of New York says U.S. Treasury Secretary Timothy Geithner did not participate in or know about negotiations ensuring U.S. taxpayers would fully reimburse American International Group’s (AIG) banking partners soon after AIG received an initial $85 billion in taxpayer funds during the financial crisis of 2008.
Geithner was the president of the Federal Reserve Bank of New York until President Barack Obama appointed him U.S. Treasury Secretary. But several federal lawmakers during the past week have accused Geithner of orchestrating full payments for AIG’s banking partners during the fall and winter of 2008, when Geithner was the president of the Federal Reserve Bank of New York.
Congressman Darrell Issa (R-California) yesterday said he is requesting more information after recently receiving a letter from the head legal counsel for the Federal Reserve Bank of New York stating Geithner had no role in and was not aware of efforts by Federal Reserve officials to ensure AIG fully reimbursed its banking partners rather than negotiate a lower settlement amount when the insurance giant faced bankruptcy in 2008. Issa last week released copies of e-mails indicating Federal Reserve officials actively sought to keep U.S. taxpayers from knowing about efforts to fully reimburse banks with contractual business ties to AIG.
But the Jan. 8 letter to Issa from the Federal Reserve Bank of New York’s general counsel, Thomas Baxter, suggests lower-level employees kept Geithner out of the loop regarding negotiations and settlement amounts.
“In my judgment, as the New York Fed’s chief legal officer, disclosure matters of this nature did not warrant the attention of the president,” Baxter wrote. “Further, Mr. Geithner played no role in, and had no knowledge of, the disclosure deliberations and communications referenced in those e-mails.”
Geithner last week denied having any role in the controversial negotiations between AIG officials and representatives of banking giants Goldman Sachs, Deutsche Bank and Societe Generale. But Issa suggested the letter from Baxter confirms Federal Reserve Bank officials already knew Geithner’s position on the matter and carried out his will.
“It’s a staggering admission by Mr. Baxter that he felt strong enough that Secretary Geithner wanted him to limit AIG’s disclosures on counterparty payments to the SEC that he says he didn’t even feel a need to bring the details to his boss’ attention,” Issa said. “This letter raises more questions on the inner-workings of the New York Fed during one of the most pivotal periods in our nation’s history.”
Issa isn’t the only federal lawmaker looking into the matter.
Congressman Spencer Bachus (R-Alabama) and Congressman Elijah Cummings (D-Maryland), last week requested Geithner appear before the House committees on which they serve to explain how AIG’s banking partners received 100 cents on the dollar for high-risk, mortgage-backed securities deals known as credit default swaps, which crippled AIG and would have bankrupted the insurer had it not received tens of billions of dollars in involuntary aid from U.S. taxpayers. Because an AIG bankruptcy would have meant banks a much lower – if any – payout from AIG, federal lawmakers want to know why and how banks received full payments and to what extent Geithner, then the head of the Federal Reserve Bank of New York, might have acted to hide the payments from U.S. taxpayers.
AIG paid more than $62 billion to fully reimburse the Goldman Sachs Group and other banking partners on high-risk credit default swaps tied to various mortgage markets after receiving its initial $85 billion taxpayer bailout. But instead of revealing the extent of payments to banks, Federal Reserve officials sought to keep them hidden from the public, Issa contends.
New York Federal Reserve officials negotiated the payments to banks, which was some $13 billion more than the settlement AIG officials attempted to negotiate. Issa suggested Geithner used the AIG bailout as a “backdoor” bailout for banks without taxpayers knowing.
Formerly the world’s largest insurance company, AIG became the world’s most indebted insurer after federal officials in September 2008 agreed to extend the company an $85 billion loan in exchange for an 80 percent share of company stocks. Federal officials said allowing AIG to go bankrupt would have a devastating impact on U.S. and international financial markets and later revised lending terms, making it a $153 billion loan with a lower interest rate and longer repayment period.
Federal Lawmakers Want Geithner to Testify about AIG Payments
Jan. 8, 2010 – Already a known tax cheat, lawmakers want U.S. Treasury Secretary Timothy Geithner to answer for his potential role in ensuring banks received every cent contractually owed to them by the ailing American International Group (AIG) even after an initial $85 billion in taxpayer funds was allocated to the firm to stave off its impending bankruptcy in the fall and winter of 2008.
Congressman Spencer Bachus (R-Alabama) and Congressman Elijah Cummings (D-Maryland), have requested Geithner appear before the House committees on which they serve to explain how AIG’s banking partners received 100 cents on the dollar for high-risk, mortgage-backed securities deals known as credit default swaps, which crippled AIG and would have bankrupted the insurer had it not received tens of billions of dollars in involuntary aid from U.S. taxpayers. Because an AIG bankruptcy would have meant banks a much lower – if any – payout from AIG, federal lawmakers want to know why and how banks received full payments and to what extent Geithner, then the head of the Federal Reserve Bank of New York, might have acted to hide the payments from U.S. taxpayers.
“It is critical that we understand if the [Federal Reserve Band of New York] did request the withholding of information and what the extent and nature of the pressure exerted by the [Federal Reserve Bank of New York] on AIG may have been,” Cummings wrote in a letter requesting a hearing before the House Oversight and Government Reform Committee.
While Cummings wants to look into potential regulatory improprieties, Bachus more pointedly is accusing Geithner and others of deliberately misleading U.S. taxpayers.
“This calculated attempt to withhold important information from the public and market participants runs counter to the principles of our capital markets,” Bachus said in a statement.
Bachus is the ranking Republican member of the House Financial Services Committee while Cummings is a member of the House Oversight and Government Reform Committee. The lawmakers today requested their respective committees investigate Geithner’s role in ensuring banks received full payments instead of negotiating lower amounts and then acted to hide payments from the public.
The matter is the second financial scandal for Geithner during the past year. Soon after being appointed U.S. Federal Reserve chairman by President Barack Obama, Geithner was forced to pay some $34,000 in Social Security and Medicare taxes he hadn’t paid over several years.
Bachus and Cummings requested the hearings after recent news reports referencing e-mail correspondences between Federal Reserve Bank of New York officials and AIG suggesting Geithner and others sought to keep U.S. taxpayers from knowing how their tax dollars were being used.
The calls for Congressional investigations come after Congressman Darrell Issa (R-California) recently obtained e-mail correspondences between AIG officials and the Federal Reserve Bank of New York showing Federal Reserve officials attempted to hide the fact AIG fully would reimburse its trading partners on mortgage-backed securities and other contracts. Issa is the ranking member of the House Oversight and Government Reform Committee and requested copies of e-mails and other correspondences between AIG and Federal Reserve officials in October after news reports indicated AIG fully reimbursed its trading partners instead of negotiating settlement terms after nearly averting bankruptcy via AIG’s taxpayer-funded federal bailout.
AIG paid more than $62 billion to fully reimburse the Goldman Sachs Group and other banking partners on high-risk credit default swaps tied to various mortgage markets after receiving its initial $85 billion taxpayer bailout. But instead of revealing the extent of payments to banks, Geithner sought to keep them hidden from the public, Issa contends.
New York Federal Reserve officials negotiated the payments to banks, which was some $13 billion more than the settlement AIG officials attempted to negotiate. Issa suggested Geithner used the AIG bailout as a “backdoor” bailout for banks without taxpayers knowing.
Formerly the world’s largest insurance company, AIG became the world’s most indebted insurer after federal officials in September 2008 agreed to extend the company an $85 billion loan in exchange for an 80 percent share of company stocks. Federal officials said allowing AIG to go bankrupt would have a devastating impact on U.S. and international financial markets and later revised lending terms, making it a $153 billion loan with a lower interest rate and longer repayment period.
Report: Geithner Sought to Keep Taxpayers in Dark Over AIG Payments
Jan. 7, 2010 – Even after U.S. taxpayers involuntarily provided an initial $85 billion bailout to ailing insurer American International Group (AIG), U.S. Treasury Secretary Timothy Geithner pressured company officials not to inform taxpayers about payments to AIG’s banking partners.
Geithner’s efforts at secrecy occurred while he was head of the Federal Reserve Bank of New York, which initially allocated some $85 billion in taxpayer funds to AIG in late 20087. But instead of letting U.S. taxpayers know which banks would receive funds, Geithner pressured AIG officials to not disclose the names of its banking partners and the amounts of taxpayer dollars the banks would get through their contractual ties.
Congressman Darrell Issa (R-California) recently obtained e-mail correspondences between AIG officials and the Federal Reserve Bank of New York showing Federal Reserve officials attempted to hide the fact AIG fully would reimburse its trading partners on mortgage-backed securities and other contracts. Issa is the ranking member of the House Oversight and Government Reform Committee and requested copies of e-mails and other correspondences between AIG and Federal Reserve officials in October after news reports indicated AIG fully reimbursed its trading partners instead of negotiating settlement terms after nearly averting bankruptcy via AIG’s taxpayer-funded federal bailout.
“It appears that the New York Fed deliberately pressured AIG to restrict and delay the disclosure of important information,” Issa told Bloomberg News. Issa suggested Geithner wanted to keep U.S. taxpayers in the dark about “politically inconvenient information.” Geithner became chairman of the U.S. Federal Reserve soon afterward upon President Barack Obama’s appointment.
AIG paid more than $62 billion to fully reimburse the Goldman Sachs Group and other banking partners on high-risk credit default swaps tied to various mortgage markets after receiving its initial $85 billion taxpayer bailout. But instead of revealing the extent of payments to banks, Geithner sought to keep them hidden from the public, Issa contends.
New York Federal Reserve officials negotiated the payments to banks, which was some $13 billion more than the settlement AIG officials attempted to negotiate. Issa suggested Geithner used the AIG bailout as a “backdoor” bailout for banks without taxpayers knowing.
Formerly the world’s largest insurance company, AIG became the world’s most indebted insurer after federal officials in September 2008 agreed to extend the company an $85 billion loan in exchange for an 80 percent share of company stocks. Federal officials said allowing AIG to go bankrupt would have a devastating impact on U.S. and international financial markets and later revised lending terms, making it a $153 billion loan with a lower interest rate and longer repayment period.
Under the new plan, the Federal Reserve provided AIG $60 billion in loans and the U.S. Treasury another $40 billion so company officials could buy up preferred stock. Federal officials also approved $53 billion to purchase the company’s risky mortgage-backed assets and other debt contracts.