AIG - Securities Lending - Run

3.7 AIG’s securities lending operations faced the same “run on the bank” pressures as many other financial firms.
(a) Bernanke: On “September 16, AIG, the largest multidimensional insurance company in the world, which had been selling credit insurance, came under enormous attack from people demanding cash either through margin requirements or through short-term funding,” (PTX 708 at 80), which was part of a pattern of “Whenever there was doubt about a firm, as in a standard bank run, the investors, the lenders, and the counterparties would all pull back their money quickly for the same reason that depositors would pull their money out of a bank that was thought to be having trouble” (Id. at 79).  (p10)

  • Document 281-1 - Plaintiffs’ Corrected Proposed Findings of Fact - 99p
    • Starr International Company, Inc. v. The United States - Case 1:11-cv-00779-TCW

Four days later, Goldman Sachs issued a report to clients that echoed much of Coffey’s internal analysis.

  • The report, “Don’t Buy AIG: Potential Downgrades, Capital Raise on the Horizon,” warned that “we foresee – billion in economic losses from [AIG’s credit default swap] book, which could result in larger cash outlays . . .  resulting in a significant shift in the risk quality of AIG’s assets. . . .

Put simply, we have seen this credit overhang story before with another stock in our coverage universe, and foresee outcomes similar in nature but on a much larger scale.”

2011 01 - FCIC - Final Report of the National Commission on the Causes of the Financial and Economic Crisis in the United States - 663p