AIG - Regulatory Forbearance

  • NySID - Dinallo - Governor - 20/30B
  • legal case - Dinallo - Securities Lending Needs
  • Forbearance could address increases in European bank capital requirements; makes lending unnecessary. (p11)

2008 0916 - FRB - Email from Julie Dolan Regarding AIG Documents Requested - 17p

2008 0913 - FCIC - FRBNY Email Mahoney and Mosser re AIG Update - SB-AIG-35651 - 1p

  • AIG has put together a term sheet for NYSID, which they will be discussing this evening.
  • The term sheet would outline all pieces of liquidity plan, and plans for debt and equity injections, plans for asset sales as well as regulatory forebearance to move assets from subs to parent.

  • NYSID: Dinallo outlined the same plan that AIG gave us earlier --- ie move muni's from P&C subs to parent, and parent send equity in life insurance subs to the P&C subs in return.
  • There are a number of multi-state regulatory hurtles to this, but Dinallo thinks it is possible to do.
  • Dinallo described P&C companies in NY and PA as having very large capital cushions, and so he thinks that they can accommodate this.
  • He also noted negative consequences in insurance markets in general if AIG goes down (ie cost of insurance is likely be much higher if they file) and negative consequences in muni bond market if GICs default so regulatory forbearance can be justified politically.
  • They are very happy to speak with our experts (Elise and team) tomorrow with more details.
  • My impression is that while they are comfortable with the capital dilution at the P&C companies, they are less knowledgable and comfortable about the equity value of the life companies, so they have work to do on that front.