Run - AIG - FCIC

  • Geither email - 2008 09
  • 2008 0915 - FCIC - FRB - (Alexander J Psomas) - FCIC-AIG0020S00 - 1p
    • AIG is a $1 trillion asset global retail distributor of insurance products.
    • The company has a iconic franchise with over 300 legally separate distribution channels, most of which use the Flagship name.
    • Slightly more than half of operations reside in the US and the remainder overseas.
    • The firm has been a trusted name in millions of households for many decades, and has noteworthy historical presence in Asia.
    • Within the wholesale arena, the firm has noteworthy exposures to large European banks, many using insurance vehicles to facilitate regulatory capital relief.
    • The size, name, franchise and market presence (wholesale and retail) raise questions about potential worldwide contagion, should this franchise become impaired.
  • 2008 0916 - FCIC - FRB - Systemic Impact of AIG Bankruptcy attachment to FRBNY -  internal email from Alejandro LaTorre to Geithner - FCIC-SSI0007443 -  [PDF-3p]
    • Filing at holding co. level may, however, cause liquidity stresses at the insurance subsidiary level because of exposures to affiliates, and / or runs because of name aversion (risk of run mainly at the life insurance subsidiaries).
  • Beginning in March 2009, the Federal Reserve and Treasury publicly raised concerns that a sudden loss of AIG insurance capacity could have severely disrupted the market, potentially creating a market capacity shortage and significant premium increases for consumers, businesses, and financial institutions.
  • They also feared a run driven by a substantial influx of life insurance policyholders either drawing on the savings and credit features of their policies or surrendering their policies entirely, especially since some such “runs” were seen in foreign jurisdictions.520  (p134)

2010 0610 - JUNE OVERSIGHT REPORT: The AIG Rescue, Its Impact on Markets, and the Government’s Exit Strategy - Congressional Oversight Panel - 337p

  • 520 E-mail from Alejandro LaTorre, assistant vice president, Federal Reserve Bank of New York, to Timothy F. Geithner, president and chief executive officer, Federal Reserve Bank of New York and other FRBNY personnel (Sept. 16, 2008) (FRBNY AIG00483-486 <WishList>); FRBNY and Treasury briefing with Panel and Panel staff (May 11, 2010); FRBNY and Treasury briefing with Panel and Panel staff (Apr. 12, 2010).
    • Policymakers have pointed out that some runs were seen in foreign jurisdictions.
  • According to press reports, insurance policyholders in Singapore, Taiwan, Thailand, Vietnam, and Hong Kong sought to terminate their insurance policies with two of AIG‟s insurance subsidiaries (AIA and Nan Shan Life Insurance) after learning of AIG‟s financial troubles and despite the Federal Reserve‟s $85 billion rescue.
  • Examples of such disbelief include the run on Bank of East Asia in Hong Kong, China fueled by groundless rumors of overexposure to Lehman and AIG, and the run on AIG offices by worried policyholders in Singapore.
  • This suggests that the biggest negative effect of the global financial turmoil on Asia up to now may be the loss of confidence in the financial system.  (p68)

2008 12 - Asian Development Bank (ADB) - The US Financial Crisis, Global Financial Turmoil, and Developing Asia: Is the Era of High Growth at an End? - 85p