2009 0305 – GOV (Senate) – American International Group: Examining What Went Wrong, Government Intervention, And Implications for Future Regulation – Chris Dodd (D-CT)

2009 0305 - GOV (Senate) - American International Group: Examining What Went Wrong, Government Intervention, And Implications for Future Regulation, (CSPAN) Government Intervention and Regulation of AIG, Chris Dodd (D-CT) --- [BonkNote]
- [PDF-72p, VIDEO-CSPAN]
- [Senate-page]
- FRB - Donald Kohn, Vice Chairman, Board of Governors of the Federal Reserve System
- NAIC - Eric Dinallo, New York State Insurance Department - Superintendent - 8p
- OTS - Scott Polakoff, Office of Thrift Supervision
- Senator Richard Shelby (R-AL)
- Senate - Banking, Housing, and Urban Affairs

(p4-5) - Senator Richard Shelby (R-AL): AIG’s problems, however, were not isolated to its credit default swap business.
- Significant losses in AIG’s State-regulated life insurance companies also contributed to the company’s collapse.
- Because AIG was unable to cover its obligations to both its securities lending and derivatives operations, it ultimately had to seek Federal assistance.
(p5) - Senator Richard Shelby (R-AL): The causes of AIG’s collapse raise profound questions about the adequacy of our existing State and Federal financial regulatory regimes.
(p9) - Eric Dinallo, NAIC / New York State Insurance Department, Superintendent - I think that it is important to put some of these numbers in context, because I disagree with the concept that the securities lending program had much of anything to do with the problems at AIG.
(p10) - Eric Dinallo: The securities lending business ... is ...not the purpose or the reason for the Federal bailout.
- If there had been no Financial Products division involvement, I don’t think there would have been any bailout of AIG’s operating companies, certainly not the securities lending business.

14:40 - Senator Richard Shelby (R-AL) -
- (p4) - Significant losses in AIG’s State-regulated life insurance companies also contributed to the company’s collapse.
- (p5) - More than $17 billion in Federal assistance has been used to recapitalize the State-regulated insurance companies to ensure that they are able to pay their policy holders' claims.

(p17) - Senator Richard Shelby (R-AL) - Sir, AIG’s most recent annual report states that, quote, ‘‘The two principal causes for its unprecedented strain on liquidity during the second half of 2008,’’ and these are their words, ‘‘were a demand for the return of cash collateral under the U.S. securities lending program and collateral calls on credit default swaps issued by the Financial Products subsidiary.’’
Eric Dinallo, NAIC / New York State Insurance Department, Superintendent - And I agree with that. I am sorry.
Senator SHELBY. ——with the firm’s analysis of its own problems?
(p17) - Eric Dinallo - No, I don't actually disagree with that. I agree with it. The only difference is causation.
- As I said, the 25 other domestic life insurance companies that we have examined have not had a problem with their securities lending.
- The causation of AIG's problem with its securities lending business was essentially the run on the entire company caused by its exposure from Financial Products division.

33:00 - Eric Dinallo, NAIC / New York State Insurance Department, Superintendent - Securities Lending didn't have anything/much to do with AIG Collapse.
- run on aig life, Reputational Risk
Securities Lending, RMBS, Liquidity, [C-3, 1980 SOA Paper], Run on AIG,
Scott Polakoff - OTC
(p25) - Donald KOHN, Vice Chairman, Board of Governors of the Federal Reserve System
- Our authority under the Federal Reserve Act is to make loans.
  - We thought it was a short-term liquidity situation— in mid-September, this is what we thought—and that if we could bridge this situation with liquidity, then the company could make the adjustments to keep itself a going concern.
  - It turned out that the problems were deeper...