AIG - Hedge Fund
- Ben Bernanke
- Eric Dinallo
- Ed Liddy / Carolyn Maloney
- Hank Paulson
- Terri Vaughan
- (AIG) ... Very much a hedge fund on top of insurance companies.
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- Something like this, in my judgment, should never have happened.
2008 0921 - Meet the Press - Treasury Secretary Henry Paulson - [link]
- “A.I.G. exploited a huge gap in the regulatory system,” Mr. Bernanke said.
- “There was no oversight of the financial products division.
- This was a hedge fund, basically, that was attached to a large and stable insurance company.”
- And this quasi-hedge fund, Mr. Bernanke went on, to nobody’s surprise, made irresponsible bets and took huge losses.
2009 0303 - NYT - Fed Chief Says Insurance Giant Acted Irresponsibly - [link]
- (p32) - Terri Vaughan (NAIC CEO / IA) -
- I read something recently that Chairman Bernanke said, I think it was Chairman Bernanke, that AIG was basically a hedge fund on top of an insurance company.
2009 0305 - GOV (House) - Perspectives on Systemic Risk - [PDF-254p,
- (p118-119) - Eric DINALLO (Commissioner - New York State Insurance Department) - It is true, as I said in my opening, that what we would call a covered CDS, where you actually have exposure to the referenced entity, is clearly an insurance transaction.
- AIG, out of its unregulated, non-insurance entity—essentially, the hedge fund that was bolted onto AIG at the holding company level—wrote $460 billion worth of that; and there was not nearly the solvency and capital requirements that are associated with a normal insurance undertaking.
2008 1014 - GOV (Senate) - The Role of Financial Derivatives in the Current Financial Crisis, aka Hearing to Review the Role of Credit Derivatives in the U.S. Economy - [PDF-135p, VIDEO-CSPAN]
- (p95) - Carolyn Maloney (D-NY) - Last question: Would you say it is a serious mistake to have allowed a risky product to be attached to one of the great insurance companies in the world? Was that a bad regulatory decision?
- Ed LIDDY (AIG-CEO). Yes. I would say two things to you, Congresswoman.
- One, any time you see a business stray from what it is really good at, watch out.
- And, two, and Chairman Bernanke uses this vernacular, and I think it is very appropriate, what we had at AIG was a series of well-regarded, well-run, well-capitalized insurance companies, and to it we attached an internal hedge fund.
- That internal hedge fund worked fine for a while, but we became too aggressive in terms of the risks that we were prepared to take, and when the capital markets stopped functioning, it exposed that aggressiveness for what it was and that is what caused the liquidity problem.