Report: AIG to get $35.5 Billion for Asia-based Subsidiary
March 2, 2010 – Officials for 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.
Report: Federal Officials Sought National Security Status for AIG Info
Jan. 25, 2010 – Even as U.S. taxpayers involuntarily were allocating 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.
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.
AIG Plans Hong Kong IPO for Subsidiary Partly Owned by U.S. Taxpayers
Dec. 3, 2009 – Soon after allocating billions of dollars worth of shares in subsidiary firms to the federal government in exchange for debt forgiveness, officials for taxpayer-rescued insurance giant American International Group (AIG) today announced plans to list one of the life insurance subsidiaries on the Hong Kong stock exchange.
In exchange for forgiving $25 billion in debt to U.S. taxpayers, the Federal Reserve Bank of New York was given preferred shares in AIG’s Asian-based life insurance subsidiaries, American International Assurance (AIA) and the American Life Insurance Company (ALICO). Dow Jones Newswires recently reported AIG officials would offer up to 33 percent of AIA on the Hong Kong Stock Exchange in order to raise somewhere between $5 billion to $10 billion during the first quarter of 2010.
In exchange for preferred shares of the life insurance units, the Federal Reserve Bank of New York forgave $25 billion owed by AIG to U.S. taxpayers. AIG now owes some $17 billion to taxpayers through its lending agreements with Federal Reserve officials but still has access to up to $35 billion in potential taxpayer loans. AIG’s chief executive officer said the move underscores the firm’s commitment to repaying its debt while making the subsidiary units more attractive to potential buyers.
AIG officials initially disclosed the then-pending business transfer while reworking terms of its nearly $183 billion taxpayer bailout. The transfer enables AIG to reduce its debts while awaiting a recovery among credit markets, which has made it hard for AIG officials to find buyers and get a fair value for its assets while attempting to repay its federal debt.
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 has raised more than $2 billion through the sale of several subsidiary units. Industry analysts say the insurer could raise up to $50 billion through the sales of AIG’s U.S.-based and overseas life insurance units and retirement savings units.
Fed Goes into Business with AIG for $25 Billion
Dec. 2, 2009 – Having already taken an involuntary plunge into the auto industry as owners of General Motors, U.S. taxpayers now are the involuntary proprietors of two overseas life insurance units.
Officials for struggling insurer American International Group (AIG) this week announced they have closed two deals with the Federal Reserve Bank of New York in which the Federal Reserve Bank gets control of AIG’s Asia-based American International Assurance Company (AIA) and the American Life Insurance Company (ALICO), which is headquartered in Delaware but primarily does business in Asia.
In exchange for preferred shares of the life insurance units, the Federal Reserve Bank of New York forgave $25 billion owed by AIG to U.S. taxpayers. AIG now owes some $17 billion to taxpayers through its lending agreements with Federal Reserve officials but still has access to up to $35 billion in potential taxpayer loans. AIG’s chief executive officer said the move underscores the firm’s commitment to repaying its debt while making the subsidiary units more attractive to potential buyers.
“Today’s announcement that we have reduced our debt to the Federal Reserve Bank of New York by $25 billion sends a clear message to taxpayers: AIG continues to make good on its commitment to pay the American people back,” said AIG’s top executive, Bob Benmosche, when announcing the deal yesterday. “Moreover, these transactions position AIA and ALICO, two terrific, unique international life insurance businesses, for the future.”
AIG officials are weighing several possibilities for unloading the two international life insurance firms, including making an initial public offering or selling them to third parties.
U.S. Senator Chuck Grassley (R-Iowa) criticized the move by the Federal Reserve, saying it endangers U.S. taxpayers.
“Exchanging debt for equity still leaves taxpayer dollars at substantial risk,” Grassley said in a letter to U.S. Treasury Secretary Timothy Geithner. The move means taxpayers could lose billions of dollars, Grassley contends.
AIG officials initially disclosed the then-pending business transfer while reworking terms of its nearly $183 billion taxpayer bailout. The transfer enables AIG to reduce its debts while awaiting a recovery among credit markets, which has made it hard for AIG officials to find buyers and get a fair value for its assets while attempting to repay its federal debt.
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 has raised more than $2 billion through the sale of several subsidiary units. Industry analysts say the insurer could raise up to $50 billion through the sales of AIG’s U.S.-based and overseas life insurance units and retirement savings units.
AIG Settles $20 Billion Legal Dispute with Former Executives
Nov. 30. 2009 – Officials for embattled insurer American International Group (AIG) recently agreed to settle a legal dispute with its former chief executive for nearly 40 years, Maurice “Hank” Greenberg, who remains the single largest individual holder of stock in the insurance giant recently involuntarily rescued by U.S. taxpayers.
AIG officials agreed to return to Greenberg several treasured items he left at his AIG office upon his hastened departure from the firm in 2005. AIG also will reimburse up to $150 million in legal costs to Greenberg and Howard Smith, AIG’s former chief financial officer. AIG officials announced the settlement in a federal filing earlier this month.
The settlement means AIG no longer will have to spend money on costly legal fees, and Greenberg will have access to company-controlled materials so he can write his memoirs about his 40 years at the helm of what once was the world’s largest insurance company.
The lawsuit filed by AIG accused Greenberg and other former company officials of violating their fiduciary duties and misappropriating company stocks in a deal involving another company controlled by Greenberg. In an order issued Dec. 4, New York State Supreme Court Justice Charles E. Ramos denied motions to dismiss the breach-of-fiduciary-duty lawsuit filed by AIG in early 2008.
The AIG suit claimed Greenberg, Smith and others misappropriated AIG shares valued at about $20 billion in March 2005, but they remained as AIG directors until June 2005, which Greenberg and Smith deny. Greenberg controls Starr International and was AIG’s chief executive officer of 40 years at the time of the deal in question. Greenberg and Smith resigned from AIG in March 2005, but Greenberg remains the single largest holder of shares in the struggling insurer.
The AIG suit also claims Greenberg oversaw a takeover of Starr International’s board of directors in March 2005 and went back on a deal in which a block of AIG shares controlled by Starr International were used to fund a deferred-compensation benefit for some AIG executives and protect AIG from hostile takeover.
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 has raised more than $2 billion through the sale of several subsidiary units. Industry analysts say the insurer could raise up to $50 billion through the sales of AIG’s U.S.-based and overseas life insurance units and retirement savings units.
AIG Borrows Another $2.1 Billion from Fed
Nov. 10, 2009 – Officials for taxpayer-rescued American International Group (AIG) accessed another $2.1 billion of its $182.5 billion federal bailout in order to purchase shares of its subsidiary aircraft-leasing unit, the International Lease Finance Corporation (ILFC).
AIG officials revealed the $2.1 billion request on its quarterly federal filing last week. Company officials are attempting to sell its interest in the ILFC, which is one of the largest aircraft-leasing firms in the world and considered by many industry analysts to be the top customer of large jet aircraft manufacturers Boeing and U.K.-based Airbus.
The $2.1 billion will be withdrawn from a special federal lending facility created specifically for AIG through the Federal Reserve Bank of New York. AIG officials anticipate receiving the funds by Friday, according to its recent federal filing.
AIG, bailed out last year by the government, is trying to sell ILFC. It was able to draw from a credit facility established by the Federal Reserve Bank of New York, and said in the Securities and Exchange Commission filing it expects to receive the funds on Nov. 13.
AIG in March loaned $1.7 billion to the aircraft-leasing unit to meet the subsidiary’s debt obligations and extended another $2 billion to it in October. The firm has been trying to sell the large aircraft-leasing unit, but tightened global credit markets during a down economy have made it difficult to for suitors to obtain financing. Officials for the Federal Reserve Bank required ILFC officials to sign papers naming the aircraft-leasing firm the loan’s guarantor.
The ILFC owns about $7.4 billion worth of aircraft and other assets acting as collateral for the federal loans. Officials for the aircraft-leasing firm said they fully would repay the loans if AIG sells its interests in the unit.
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.
AIG attempted to sell off its overseas life insurance units and other subsidiaries to repay up to $60 billion in loans this year, but a combination of tightened global credit markets, a shortage of qualified buyers and decreased market values during a global economic downturn have caused the firm to fall short of its lofty goal. 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 has raised more than $4 billion through the sale of several of its subsidiary units. Industry analysts say the insurer could raise up to $50 billion through the sales of AIG’s U.S.-based and overseas life insurance units and retirement savings units.