AIG - Bankruptcy - Life Insurance Companies

  • Dinallo
  • Michael Moriarity
  • COP-? - companies go bankrupt and stay in business, what's different about AIG?
  • (p63) - In a recent interview with the Panel, Secretary Geithner said that on Sunday night, he got government officials to start thinking about the implications of an AIG failure both on U.S. insurance subsidiaries and around the world.222

2010 0610 - COP - Report - The AIG Rescue, Its Impact on Markets, and the Government’s Exit Strategy - 337p

 

  • 2009 0318 - GOV (House) - Federal Aid to AIG Insurance, Regulators Panel -[PDF-380p
    • (p48) - Carolyn MALONEY (D-NY). - So if Financial Products was walled off and allowed to fail, the insurance portion would be safe and sound, and going forward, is that correct?
    • Joel ARIO. (NAIC, Insurance Commissioner - PA) - Yes, the assets would be there and would be protected.  
  • 2010 0127 - GOV (House-OGR) - The Federal Bailout AIG, Edolphus Towns (D-NY)  ---  [BonkNote] 
  • [Bonk: Where is the Hearing that Michael McRaith said this?]
  • Cliff STEARNS (R-FL).
    • Now, recently Michael McRaith, who is director of the National Association of Insurance Commissioners, told the Senate Banking Committee, he said, you know, if AIG had gone in bankruptcy, we would have taken care of it.
    • It would have been an orderly disposition. This is what he said: ‘‘AIG’s insurance operations and their other companies would have simply—we would have simply bought up AIG’s insurance assets, allowing a seamless delivery of AIG’s insurance obligations.’’
    • So the question is, considering that the State Insurance Commissions would likely have seized AIG’s insurance subsidiaries, protected policyholders in an AIG bankruptcy, why was it necessary to bail out AIG with taxpayers’ money, based upon the testimony of the director of the National Association of Insurance Commissioners?
  • Mr. Hank PAULSON. I respectfully disagree with him, and I believe that it is——
  • Mr. STEARNS.
    • So you disagree with this guy, with all his knowledge, his years of experience?
  • Mr. PAULSON.
    • I will just say many people with years of experience had some regulatory responsibilities with regard to AIG, but this company was had a huge problem, and it is case No. 1 on what is wrong with our regulatory system.
    • There was no single regulator that had a line of sight on the total company.
    • So there were regulators that looked at different pieces of it, and if the company had gone down, it would have been a huge mess. (p152)
  • 2009 1210 - COP - Hearing - Hearing With Treasury Secretary Timothy Geithner, Congressional Oversight Panel  ---  [BonkNote]
  • [AIG - BankLike-? / Bankruptcy]
  • (p63) - Chair Elizabeth WARREN. Mr. Secretary, I come from a world of Chapter 11.
    • People default all the time.
      • They negotiate down on their obligations
    • Secretary Tim GEITHNER. Right.
    • Chair WARREN. And they do not bring down——
    • Secretary GEITHNER. But——
    • Chair WARREN [continuing]. The entire——
    • Secretary GEITHNER. You’re exactly——
    • Chair WARREN [continuing]. Financial system.
    • Secretary GEITHNER [continuing]. Right. And you’re a national expert on this basic issue. But banks are different. AIG is effectively a bank.
    • Chair WARREN. AIG was not a bank.
    • Secretary GEITHNER. It——
    • (p64) - Secretary GEITHNER. Can we do it a minute longer?
      • It’s a very important debate to have.
    • ....
    • Chair WARREN. Go ahead, Mr. Secretary.
    • Secretary GEITHNER. Financial institutions, which Congress has recognized for a long time, need a different type of bankruptcy regime than we have for other companies.
      • Now, AIG is not a bank, but, in effect, it operated as a bank.
        • It borrowed money, it operated on leverage, it did not have capital to support that.
        • We’ve had in place a different type of bankruptcy for banks for many, many decades, however, we need one for complex finances that operate just like banks.
      • Now, in bankruptcy, you have lots of choices.
        • You can negotiate all sorts of different treatments, in this context, and in ways that would be helpful for the country.
        • What we want is a bank-type resolution regime that gives us the choices that we’ve had for banks.
      • But, we did not have that for complex, large financial institutions.
        • And that’s what limited our choices.
  • 2021 0225 - YPFS Lessons Learned Oral History Project: An Interview with Eric Dinallo  ---  [BonkNote]  ---  19p 
    • (p17-18) - Eric Dinallo: Geithner asked about, because they're seriously considering, giving serious thought about a debtor in possession—DIP—thing for AIG.
      • He's like, "What do you think?"
      • I'm like, "It's a horrible idea."
      • He said, "Why?
    • I said, "Because while it looks possible on paper, and I get the point.,,
      • If you file for bankruptcy at the holding company level, all these subsidiaries, they're going to start ... Some states may even require by law … that the states will seize the operating companies, because the holding company filed for bankruptcy.
      • They're going to pull up the drawbridge, and go into castle mode.
      • Then you're going to have a run on insurance companies."
    • While I'm saying this, I swear to God, CNN is on. We took a break, and CNN was on.
      • They were lining up in Singapore for, I don't know why, but at AIG's insurance company in Singapore, they were lining up.
      • They were acting like a run-on-the-bank moment.
      • Probably to check on their insurance policy.

[Bonk Connect:]

    • 2008 0917 - FT (Financial Times) - Hundreds of AIG Policyholders Throng Asian Offices, Agence France Presse, brecorder - [link]
    • 2010 0610 - COP - Report - The AIG Rescue, Its Impact on Markets, and the Government’s Exit Strategy, Congressional Oversight Panel - 337p
  • A. The Bankruptcy Rules That Would Have Applied to AIG
    • Generally, when a company files for bankruptcy, its creditors will be subject to an automatic stay or an injunction that prevents the creditors from taking further action to collect on their debts.889
    • Thus, the debtor’s assets will be protected while negotiations take place with creditors.  (p221)

2010 0610 - COP - Report - The AIG Rescue, Its Impact on Markets, and the Government’s Exit Strategy, Congressional Oversight Panel - 337p