Government Assistance for AIG: Summary and Cost
Total Page:16
File Type:pdf, Size:1020Kb
Load more
Recommended publications
-
American International Group, Inc
American International Group, Inc. Resolution Plan Public Section December 31, 2015 AIG RESOLUTION PLAN – PUBLIC SECTION A. INTRODUCTION American International Group, Inc. (“AIG, Inc.” and together with its subsidiaries and affiliates, “AIG” or the “Company”) is a leading global insurance organization that offers insurance products and services that help businesses and individuals in over 100 countries and jurisdictions protect their assets, manage risks and provide for retirement security. AIG provides a diverse range of property and casualty insurance, life insurance, retirement products, mortgage insurance and related financial services to its customers. Section 165(d) of the Dodd-Frank Wall Street Reform and Consumer Protection Act (“Dodd-Frank Act”) and the related joint implementing regulation (“Dodd-Frank Rule”) issued by the Board of Governors of the Federal Reserve System (“FRB”) and the Federal Deposit Insurance Corporation (“FDIC”) require each nonbank financial company, designated as systemically important by the Financial Stability Oversight Council (“FSOC”), to submit to the FRB and the FDIC a plan for that organization’s rapid and orderly resolution in the event of material financial distress or failure (“Resolution Plan” or the “Plan”). On July 8, 2013, the FSOC designated AIG as a nonbank systemically important financial institution (“SIFI”) pursuant to the Dodd-Frank Act. The Dodd-Frank Act and the Dodd-Frank Rule require AIG to demonstrate how the Company could be resolved within a reasonable period of time without extraordinary government support and in a manner that substantially mitigates the risk that failure of the Company would have on the financial stability of the U.S. AIG has made recovery and resolution preparedness a company-wide priority and undertaken significant initiatives to reduce risk and focus on its insurance businesses. -
AIG Financial Products Corp
AIG Financial Products Corp. 50 Danbury Road, Wilton, CT 06897-4444 For Immediate Release AIG FINANCIAL PRODUCTS AND GLOBAL INFRASTRUCTURE PARTNERS AGREE ON THE ACQUISITION OF LONDON CITY AIRPORT LONDON – 11 October, 2006 -- AIG Financial Products Corp. (AIG-FP), a wholly- owned subsidiary of American International Group, Inc., and Global Infrastructure Partners (GIP), the infrastructure joint venture between Credit Suisse and GE Infrastructure, announced today that they have signed a definitive agreement to acquire 100% of the share capital of the company that owns and operates the business known as London City Airport (the “Airport") from Airport Management and Investment Limited. Pursuant to the terms of the deal, AIG-FP and GIP will each own 50% of the equity interest of the company that owns the Airport. The Airport is located in the Royal Docks, in the London Borough of Newham in East London. The Airport is unique in that it predominantly serves business travelers to and from London, given its convenient location. The Airport is less than three miles from Canary Wharf, six miles from the City of London, and 10 miles from the West End. It offers easy access to 27 destinations within the United Kingdom and across Europe. The Airport also ranks as the third largest corporate aviation facility in the United Kingdom. The transaction remains subject to EU merger clearance and currently is expected to close in November 2006. “I am extremely pleased that AIG Financial Products and Global Infrastructure Partners have been successful in their bid for London City Airport,” said Joseph Cassano, President of AIG-FP. -
The Financial Structure of the Derivatives
Chapter Six AIG 1 Chapter Six AIG in the Crisis Abstract: The financial structure of the derivatives insured by AIG with credit default swaps (CDS) was ultimately related to the systemic risk from the inability of the mortgagors to service their debts. AIG made several serious mistakes. First: The estimate of the drift of the capital gain, which drove the bubble, was based upon the unsustainable growth of the housing price index 2004-06. A collapse would occur when the unsustainable capital gain declined below the interest rate. Second, risk was underestimated because AIG ignored the negative correlation between the capital gains and the liabilities/claims. The CDS claims grew when the value of the insured obligations declined. This set off collateral requirements, and the stability of AIG was undermined. The solution for the optimal insurance liabilities on the basis of SOC is derived. The SOC approach is a generalization of the contributions of the economics and actuarial literature. The chapter concludes with an evaluation of the government bailout. Introduction. At its peak, American International Group (AIG) was one of the largest and most successful companies in the world boasting a Triple-A credit rating, over $1 trillion in assets, and 76 million customers in more than 130 countries. Yet the sophistication of AIG’s operations was not matched by an equally sophisticated risk-management structure. This poor management structure, combined with a lack of regulatory oversight, led AIG to accumulate staggering amounts of risk, especially in its subsidiary, AIG Financial Products (AIGFP). I draw upon the Congressional Oversight Panel Report (COP, 2010) that describes AIG’s role in the financial market crisis. -
10The Financial Crisis and the New York Federal Reserve District YEARS AFTER
10YEARS AFTER The Financial Crisis and the New York Federal Reserve District 10 YEARS AFTER: THE FINANCIAL CRISIS AND THE NEW YORK FEDERAL RESERVE DISTRICT 1 ACKNOWLEDGMENTS This report was researched and written by Maggie Corser. Shawn Sebastian provided supplemental writing and editing. It was edited by Emily Gordon and Jordan Haedtler, Center for Popular Democracy. The report benefitted from and cites data analysis by the Economic Policy Institute of the Current Population Survey, and the Urban Institute of the Survey of Consumer Finances. ABOUT THE CONTRIBUTORS The Center for Popular Democracy (CPD) works to create equity, opportunity and a dynamic democracy in partnership with high-impact base-building organizations, organizing alliances, and progressive unions. CPD strengthens our collective capacity to envision and win an innovative pro-worker, pro-immigrant, racial and economic justice agenda. www.populardemocracy.org Fed Up is a coalition of community organizations and labor unions across the country, calling on the Federal Reserve to reform its governance and adopt policies that build a strong economy for the American public. The Fed can keep interest rates low, give the economy a fair chance to recover, and prioritize genuine full employment and rising wages. www.ThePeoplesFed.org 2 10 YEARS AFTER: THE FINANCIAL CRISIS AND THE NEW YORK FEDERAL RESERVE DISTRICT 10 Years After: the Financial Crisis and the New York Federal Reserve District EXECUTIVE SUMMARY This report marks the 10-year anniversary of the global financial crisis that threatened the stability of the financial system and resulted in severe and protracted economic hardship for communities across the United States. -
Changed the Maxpages
0001 [ST: 1] [ED: 10000] [REL: 010] (Beg Group) Composed: Thu Feb 19 18:10:18 EST 2009 XPP 8.1C.1 Patch #5 SC_00389 nllp 60098 [PW=500pt PD=684pt TW=360pt TD=580pt] VER: [SC_00389-Local:10 Feb 09 15:46][MX-SECNDARY: 12 Feb 09 09:05][TT-: 23 Aug 08 10:46 loc=usa unit=60098-aig]34 AIG’s Financial Distress: How Credit Default Swaps and the Lack of Regulation Brought Down an Insurance Giant and Implications for the Insurance Industry by Paul Walker-Bright and Timothy P. Law* I. INTRODUCTION The recent financial collapse of American International Group, Inc. (“AIG”) came as a shock to many people. How, they wondered, could one of the largest insurance organizations in the world fall so far and so quickly, to the point of bankruptcy and eventual bailout by the federal government? Equally troubling are the implications of AIG’s collapse on the insurance industry, in terms of the possible future of AIG’s subsidiary insurance companies and the potential for changes in the way insurance is regulated going forward. This article will attempt to address these questions and concerns. First, it will provide a brief summary of the causes of AIG’s financial distress, including a discussion of credit default swaps, the arcane financial instruments at the root of the collapse, how they caused AIG’s downfall, and what the federal government has done to rescue (or at least to ease the transition of) AIG. Next, this article will discuss some of the implications for the insurance industry. -
Securities Clearing and Settlement in China – Markets, Infrastructures and Policy-Making”, by P
A Service of Leibniz-Informationszentrum econstor Wirtschaft Leibniz Information Centre Make Your Publications Visible. zbw for Economics Stolz, Stéphanie Marie; Wedow, Michael Research Report Extraordinary measures in extraordinary times – Public measures in support of the financial sector in the EU and the United States ECB Occasional Paper, No. 117 Provided in Cooperation with: European Central Bank (ECB) Suggested Citation: Stolz, Stéphanie Marie; Wedow, Michael (2010) : Extraordinary measures in extraordinary times – Public measures in support of the financial sector in the EU and the United States, ECB Occasional Paper, No. 117, European Central Bank (ECB), Frankfurt a. M. This Version is available at: http://hdl.handle.net/10419/154570 Standard-Nutzungsbedingungen: Terms of use: Die Dokumente auf EconStor dürfen zu eigenen wissenschaftlichen Documents in EconStor may be saved and copied for your Zwecken und zum Privatgebrauch gespeichert und kopiert werden. personal and scholarly purposes. Sie dürfen die Dokumente nicht für öffentliche oder kommerzielle You are not to copy documents for public or commercial Zwecke vervielfältigen, öffentlich ausstellen, öffentlich zugänglich purposes, to exhibit the documents publicly, to make them machen, vertreiben oder anderweitig nutzen. publicly available on the internet, or to distribute or otherwise use the documents in public. Sofern die Verfasser die Dokumente unter Open-Content-Lizenzen (insbesondere CC-Lizenzen) zur Verfügung gestellt haben sollten, If the documents have been made available -
American International Group, Inc
American International Group, Inc. Financial Supplement Second Quarter 2010 This report should be read in conjunction with AIG's Quarterly Report on Form 10-Q for the quarter ended June 30, 2010 filed with the Securities and Exchange Commission. American International Group, Inc. Financial Supplement Table of Contents Consolidated Asia Operating Statistics........................................................................................................................35 Consolidated Statement of Income (Loss)……. ..............................................................................1 - 2 Japan Operating Statistics......................................................................................................................36 Consolidated Statement of Segment Operations .............................................................................3 – 4 Foreign Life Insurance & Retirement Services Notes ............................................................................37 Summary of Non-qualifying derivative hedging activities....................................................................5 Financial Services Consolidated Balance Sheet.............................................................................................................. 6-7 Financial Services Operating Results..................................................................................................38 Debt and Capital...................................................................................................................................8 -
Metlife's Lawsuit Against the FSOC Could Lead to More Financial
MetLife’s Lawsuit Against the FSOC Could Lead to More Financial Crashes and More Massive Bailouts Like AIG’s The Financial Stability Oversight Council (FSOC) is the country’s only early warning system for systemic threats posed to our financial system and economy from nonbank financial firms. It is also the only entity that stands between taxpayers and future bailouts of such nonbank firms. Before the 2008 crash, the insurance company AIG, the investment banks Bear Stearns, Lehman Brothers, Goldman Sachs, Morgan Stanley, and Merrill Lynch, the money market funds, and GE were all nonbank financial firms. They all played roles in causing the 2008 crash and, except for Lehman, all required massive government support and/or taxpayer backed bailouts. The FSOC was created to prevent nonbank financial firms like these from ever posing such risks to our financial system and to our taxpayers. Yet just a few short years after the 2008 crash, the FSOC is under attack from the financial services industry. The financial services industry has launched this attack even though many industry participants called for the creation of just such an entity following the crash. How could this be? There are several answers to that question, but the writers of the Financial Times blog Alphaville showed one reason in just one chart: many in the financial industry hope that the more time passes and the farther away the 2008 financial crisis seems, the less important the need for financial reform will appear: But the financial crisis cost the American people more than $20 trillion. For that reason, we cannot afford to let elected officials, policy makers and regulators forget the painful and costly lessons of 2008. -
The Rescue of American International Group Module Z: Overview
The Journal of Financial Crises Volume 3 Issue 1 2021 The Rescue of American International Group Module Z: Overview Rosalind Z. Wiggins Yale Program on Financial Stability Aidan Lawson Yale University Steven Kelly Yale University Lily S. Engbith Yale University Andrew Metrick Yale University Follow this and additional works at: https://elischolar.library.yale.edu/journal-of-financial-crises Part of the Corporate Finance Commons, Economic History Commons, Economic Policy Commons, Finance Commons, Finance and Financial Management Commons, Macroeconomics Commons, Other Public Affairs, Public Policy and Public Administration Commons, Political Economy Commons, and the Public Economics Commons Recommended Citation Wiggins, Rosalind Z.; Lawson, Aidan; Kelly, Steven; Engbith, Lily S.; and Metrick, Andrew (2021) "The Rescue of American International Group Module Z: Overview," The Journal of Financial Crises: Vol. 3 : Iss. 1, 208-281. Available at: https://elischolar.library.yale.edu/journal-of-financial-crises/vol3/iss1/8 This Case Study is brought to you for free and open access by the Journal of Financial Crises and EliScholar – A Digital Platform for Scholarly Publishing at Yale. For more information, please contact [email protected]. The Rescue of American International Group Module Z: Overview1 Rosalind Z. Wiggins,2 Aidan Lawson,3 Steven Kelly,4 Lily S. Engbith,5and Andrew Metrick6,7 Yale Program on Financial Stability Case Study March 17, 2020; revised: April 15, 2021 Abstract In September 2008, in the midst of the broader financial crisis, the Federal Reserve Board of Governors used its emergency authority under Section 13(3) of the Federal Reserve Act to authorize the largest loan in its history, a $85 billion collateralized credit line to American International Group (AIG), a $1 trillion insurance and financial company that was experiencing severe liquidity strains. -
Systemic Risk Regulation of Non-Bank Financial Institutions
Regulatory Reform 10 Years After the Financial Crisis: Systemic Risk Regulation of Non-Bank Financial Institutions Jay B. Sykes Legislative Attorney April 12, 2018 Congressional Research Service 7-5700 www.crs.gov R45162 Systemic Risk Regulation of Non-Bank Financial Institutions Summary When large, interconnected financial institutions become distressed, policymakers have historically faced a choice between (1) a taxpayer-funded bailout, and (2) the destabilization of the financial system—a dilemma that commentators have labeled the “too-big-to-fail” (TBTF) problem. The 2007-2009 financial crisis highlighted the significance of the TBTF problem. During the crisis, a number of large financial institutions experienced severe distress, and the federal government committed hundreds of billions of dollars in an effort to rescue the financial system. According to some commentators, the crisis underscored the inadequacy of existing prudential regulation of large financial institutions, and of the bankruptcy system for resolving the failure of such institutions. In response to the crisis, Congress passed and President Obama signed the Dodd-Frank Wall Street Reform and Consumer Protection Act (Dodd-Frank) in 2010. Titles I and II of Dodd-Frank are specifically directed at minimizing the systemic risk created by TBTF financial institutions. In order to minimize the risks that large financial institutions will fail, Title I of Dodd-Frank establishes an enhanced prudential regulatory regime for certain large bank holding companies and non-bank financial companies. In order to “resolve” (i.e., reorganize or liquidate) systemically important financial institutions, Title II establishes a new resolution regime available for such institutions outside of the Bankruptcy Code. -
2010 Annual Report Table of Contents
American International Group, Inc. 2010 Annual Report Table of Contents AIG at a Glance 1 Chairman’s Message 2 Letter to Shareholders 3 A Conversation with AIG Chairman Steve Miller and AIG President and CEO Bob Benmosche 7 Board of Directors 12 Form 10-K 13 Shareholder Information Inside back cover About AIG American International Group, Inc. (AIG) is a leading international insurance organization serving customers in more than 130 countries. AIG companies serve commercial, institutional, and individual customers through one of the most extensive worldwide property-casualty networks of any insurer. In addition, AIG companies are leading providers of life insurance and retirement services in the United States. AIG common stock is listed on the New York Stock Exchange, as well as the stock exchanges in Ireland and Tokyo. American International Group 2010 Annual Report AIG at a Glance Chartis Inc. Chartis is a world-leading property-casualty and general insurance organization serving more than 45 million clients worldwide. With a 90-year history, one of the industry’s most extensive ranges of products and services, deep claims expertise, and excellent financial strength, Char- tis enables its commercial and personal insurance clients alike to manage virtually any risk with confidence. Chartis had $31.6 billion in net premiums written in 2010. SunAmerica Financial Group The companies that make up SunAmerica Financial Group have been keeping their promises for more than 150 years. They remain focused on what really matters — advising customers and helping them secure a safe and strong financial future. This has been, and always will be, what you can count on from SunAmerica Financial Group.With over 13,000 employees, over 300,000 financial professionals appointed to sell its insurance and retirement products, and sales locations in every state in the nation, SunAmerica Financial Group is one of the largest life insurance and retirement services organizations in the United States. -
AIG Hank Greenberg Fact Sheet on AIGFP
FACT SHEET ON AIGFP Origins and Purposes of AIGFP • Maurice R. ("Hank") Greenberg led American International Group, Inc. ("AIG") for almost 40 years until his retirement as Chairman and CEO in early 2005. Under Mr. Greenberg's leadership, AIG grew from a modest enterprise into the largest and most successful insurance company in the world. Its market capitalization increased approximately 40,000 percent between 1969, when AIG went public, and 2004, Mr. Greenberg's last full year as Chairman and CEO. AIG opened markets for U.S. businesses all over the world, and contributed significantly to U.S. gross domestic prodlict. As a result ofthe hard work oftens ofthousands of employees, AIG became a national asset. At the time of Mr. Greenberg's retirement in March 2005, AIG operated in over 130 countries and employed approximately 92,000 people. AIG had a market capitalization of $170 billion and its stock traded at $64 a share. AIG's net income per employee was over $100,000. The company also had the lowest expense ratio in the industry. • A fundamental tenet of Hank Greenberg's risk management philosophy at AIG was maintaining a diversified earnings base. Generating earnings from diverse business lines added to earnings stability in the event that any particular business unit of AIG encountered a downturn. • In 1985, the fire and casualty business in the United States recovered sharply from the distressed conditions that prevailed in 1984 and before. AIG, in part due to disciplined underwriting, kept its capital base intact, which led to AIG becoming the leading commercial and industrial insurer in the U.S.