AIG - 61 Billion

  • 2008 1003 - NYT - A.I.G. Uses $61 Billion of Fed Loan - [link]
  • AIG Press Release - <WishList>
  • Lynn E. Turner - (former Chief Accountant, Securities and Exchange Commission (SEC))
    • (p18) - And in a stunning revelation, the company disclosed on October 3rd that it borrowed $61 billion of the $85 billion made available to it by the Federal Reserve.
    • (p51) - Back to the questions that Mr. Kucinich was raising, if you’ve got an outfit that is probably no one better in the world at valuing this stuff like Goldman Sachs about these values and your auditors are now raising your value, I think it’s unconscionable you go out to the investors on an investor day and pretend like you’ve got yourself under control and you know what all the numbers are and there’s no problem.
      • And subsequent events turn around and I think pan that out when you say you’ve got $5 billion in collateral at the end of December and then up to $14 and now we’ve borrowed $61, it raises a serious question about was anyone on top of this.
    • (p69) - I just think it’s astounding that all of a sudden you’re borrowing $61 billion and yet you’ve never told the investors up to that point in time, hey, we’ve got these credit derivatives out there that could cause us such a problem that we could come short.
  • (p122) - Mark SOUDER. - (R-IN) -  Now, if your insurance division is in good shape, it means that this is concentrated in your financial services division.
    • And your insurance division, which is also investing assets, chose not to invest in as risky of assets that didn’t yield as much but were less risky.
      • Is that not true?
      • Or how would you explain that one division in a short period of time could have had $61 billion in taxpayer investment and your other division not needing it when your other division, as insurance companies do, also invests in properties, also have been struggling with mark to market, have also had, but have more regulation on the value of those assets prior to that decision?

  • (p122) - Mr. SOUDER. Let me clarify, because you referred to this several times.
    • Are you saying that the $61 billion that we put in is mostly of things that were pre-2005.
  • Martin SULLIVAN. - (Former CEO of AIG) -  I don’t know what the $61 million is, sir.
  • Mr. SOUDER.  $61 billion is what the taxpayers have already put in of the 85 to cover the losses of AIG.

  • (p131) - John Yarmuth - (D-KY) - We’ve had some testimony about the fact that only $60 billion has been drawn down of the $85 billion. What specifically was the $85 billion needed for?
  • (p131-132) - Mr. WILLUMSTAD - (Former AIG CEO) - The $85 billion number was a number that was obviously determined by the Federal Reserve.
    • The $85 billion, I believe, was intended to be a loan to cover liquidity needs inside the company.
    • It’s been characterized before as covering losses which I think is not an accurate representation.
    • Again, the loan was taken down after I left the company, so I can’t be specific about it.
      • But what happens in a crisis of confidence like this and what was happening to AIG was not a question of losses.
      • AIG has had a lot of money borrowed over the years.
      • And when you go through one of these crises, people who have loaned you money in the past stop lending to you.
      • People who give you money or put money on deposit with you want it back; that in another environment, without this crisis of confidence, AIG could have easily met all of those obligations.
      • But when you have a series of counterparties who have decided for reasons of concern about the viability of the company stop doing business with you, the company can no longer meet its obligations.
    • It’s not very much different that if all the consumers of a particular bank showed up 1 day and asked for all of their money back, there’s no bank in America that could provide that.
      • Those dollars of deposits that were given to that bank are loaned out in the communities to small businesses, consumers, credit cards.
      • The whole system is driven around confidence and viability. And once that breaks down, there is no company, certainly in the United States and I think anywhere around the world, that can sustain a run on the institution.

  • (p132) - Ms. WATSON. I think you just about answered my question, but it’s about the $85 billion, Mr. Willumstad, that has been given to bail out.
    • And as I understand, last Friday, AIG reported it had already drawn down $61 billion of the $85 billion loan.
    • Does that align itself to what you were just describing, that people want their money now?
  • Mr. WILLUMSTAD. Again, I don’t know what the use of the $61 billion was for because I wasn’t there. I’m not there.
    • But I would say, generally speaking, my assumption would be that’s exactly what it was used for.
  • Ms. WATSON. In fact, AIG has drawn down the funds so quickly that credit rating agencies have now begun downgrading AIG again.
    • And back on September 16th, AIG said that the bailout would prevent further rating downgrades.
    • And we know that you’re not at the company anymore, and I’m sure you’re surprised by how quickly the $85 billion line of credit has been consumed.
    • So one question that my constituents, and I’m sure that all American taxpayers, are asking, can you explain or try to how AIG could burn through $61 billion in just 3 weeks?
  • Mr. WILLUMSTAD. Well, again, I don’t know what the source for the use of that money was.
    • But I’m assuming that counterparties who would normally lend money to AIG are no longer lending money to AIG, and consequently that’s where the money is going.

  • (p145) - Ms. SPEIER. Now AIG has since taken up the taxpayers on $61 billion.
    • Has $20 billion of that $61 billion gone back to Goldman Sachs?
  • Mr. WILLUMSTAD. I don’t know.
  • Ms. SPEIER. Mr. Chairman, I think that’s a question we may want to ask subsequently.

GOV (House) - The Causes and Effects of the AIG Bailout, Panel 2 - [PDF-171p,