AIG - Securities Lending

  • 2008 0819 - Goldman Sachs / FRB emails - Don’t Buy AIG: Potential Downgrades, Capital Raise on the Horizon - 20p

  • 2009 0305 - GOV (Senate) - American International Group: Examining What Went Wrong, Government Intervention, And Implications for Future Regulation - aka Government Intervention and Regulation of AIG, Eric Dinallo - [PDF-72p
  • PDF-380p,
  • 2009 04 - JP Morgan - Securities Lending in a crisis environment: Lessons learned, Joshua Lavender - [link]
  • 2009 - Legal Case - American International Group, Inc. 2008 Securities Litigation - Document 95 - Complaint - Case 1:08-cv-04772-LTS Filed 05/19/2009 - 307p

  • 2010 0526 - COP - Hearing - Michael Moriarty (New York State Insurance Department - NYSID) - 7p

  • 2011 - AP - AIG: Misconceptions, Precipitating Factors in Government Bailout, and Implications for the Financial Industry, Alexis Paulovich - 56p

  • 2013 11 - FRB-NY - Securities Loans Collateralized by Cash:  Reinvestment Risk, Run Risk, and Incentive Issues, Frank M. Keane - [link]

2008 0819 - Goldman Sachs / FRB emails - Don’t Buy AIG: Potential Downgrades, Capital Raise on the Horizon - 20p

Exhibit 3: Potential rating downgrades impact on underlying fundamentals

Securities Lending

  • If securities borrowers decide not to roll based on lenders' credit ratings, AIG might have to liquidate (potentially risky) assets to generate the cash to return to borrowers, thus raising the potential for capital hits.
  • AIG is said to be one of the more risky securities lending insurance participants.
  • 2009 0305 - GOV (Senate) - American International Group: Examining What Went Wrong, Government Intervention, And Implications for Future Regulation - aka Government Intervention and Regulation of AIG - [PDF-72pCSPAN
      • 15 - Shelby, Securities lending, State Insurance Regulation,  Disturbing Story
      • 33:00 - Eric Dinallo (NY / NAIC) - 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, Donald Kohn

PDF-380p,

  • (p31) - Joel Ario (NAIC - PA):  But there is a well there where if we are pressed real hard on some sensitive topics, we don’t have clear authority to go into the holding company level.
    • And so I do think you need somebody that has clear authority at that holding company level as well.

2009 - Legal Case - American International Group, Inc. 2008 Securities Litigation - Document 95 - Complaint - Case 1:08-cv-04772-LTS Filed 05/19/2009 - 307p

  • 23. On Thursday, September 11, 2008, AIG executives brought in bankers from JP Morgan and a Blackstone consulting group, who determined that AIG would need at least $40 billion.
    • However, on Sunday morning, September 14, AIG’s outside advisers discovered that the Company’s securities lending business needed a separate injection of as much as $20 billion.
    • As a result, an offer of a $20 billion lending facility that the New York State Insurance Superintendent, Eric Dinallo, had considered establishing for the benefit of AIG became moot since it was becoming clear the Company needed at least $60 billion of financing.
  • 24. Things rapidly continued to spiral downward.
    • On September 15, AIG informed Superintendent Dinallo that it needed as much as $70 billion to avoid failing.
    • Mr. Dinallo responded that the State would not act unless there was a plan in place to provide the rest of what AIG needed to survive.
  • (p77) - 211. On August 7, 2008, AIG held its 2008 second quarter earnings conference call.
    • On the call, Mr. Willumstad acknowledged that AIG’s risk concentration in the U.S. housing market had been too high: “[Y]ou see again in retrospect much of the problems that have come about have been a concentration of risk in the U.S. housing market both in the investment portfolio and the credit default swap book.”

2010 0526 - COP - Hearing - Michael Moriarty (New York State Insurance Department - NYSID) - 7p

  • Whatever the AIG insurance companies’ losses on securities lending, those losses should not have created serious problems for other financial institutions, which were protected by the fact that they held and could keep the securities they borrowed if AIG could not return the collateral they provided.  (p7)

<Bonk: Connect with FCIC Interview - Richard Scott>

  • 2011 - AP - AIG: Misconceptions, Precipitating Factors in Government Bailout, and Implications for the Financial Industry, Alexis Paulovich - 56p
    • (p11-12) - Securities lending activities for AIG’s insurance subsidiaries were consolidated to a special unit that was not licensed as an insurance company, AIG Investments (FCIC, 2010f, 4).
    • (p12) - For collateral, AIG Securities Lending Corporation, a division of AIG Financial Products, lent securities owned by several of the parent company’s life insurance subsidiaries to authorized borrowers (Congress, 2010, 43). 
    • Google Search: "aig investment" "securities lending" - 85 results
  • 2020 03 - Yale - YPFS - The Rescue of American International Group, Module B: The Securities Borrowing Facility - 18p
    • (p7) - As markets roiled throughout the summer of 2008, AIG’s liquidity problems became increasingly clear to securities borrowers (GAO 2011, 19),