$200,000,000HSBC Bank$200,000,000Morgan Stanley$200,000,000Bank of America$200,000,000Bank of Montreal$200,000,000Royal Bank of Scotland$200,000,000Other (unknown)$4,100,000,000
Representative Mark Kirk (R-Illinois) said AIG should not be on welre from Uncle Sam, and yet paying bonuses and transferring a considerable amount of taxpayer funds to entities overseas.
An October 30, 2008 article from CNBC reported that AIG had already drawn upon $90billion of the $123billion allocated for loans.
The company went on to expand, often through subsidiaries, into other markets, including other parts of Asia, Latin America, Europe, and the Middle East.
Prudential was to buy the pan-Asian life insurance company, American International Assurance (AIA), for approximately $35.5billion.
Further information: Subprime mortgage crisis,20072012 global financial crisis,andLiquidity crisis of September 2008
In a testimony before the Senate Budget Committee on March 3, 2009, the Federal Reserve Chairman Ben Bernanke stated that AIG exploited a huge gap in the regulatory system, ... and to nobodys surprise, made irresponsible bets and took huge losses.
AIGs board of directors announced approval of the loan transaction in a press release the same day. The announcement did not comment on the issuance of a warrant for 79.9% of AIGs equity, but the AIG 8-K filing of September 18, 2008, reporting the transaction to the Securities and Exchange Commission stated that a warrant for 79.9% of AIG shares had been issued to the Board of Governors of the Federal Reserve.
Socit Gnrale$4,100,000,000Deutsche Bank$2,600,000,000Goldman Sachs$2,500,000,000Merrill Lynch$1,800,000,000Calyon$1,100,000,000Barclays$900,000,000UBS$800,000,000DZ Bank$700, The law online000,000Wachovia$700,000,000Rabobank$500,000,000KFW$500,000,000JPMorgan$400,000,000Banco Santander$300,000,000Danske Bank$200,000,000Reconstruction Finance Corporation
In April 2009 it was announced that AIG was selling the 21st Century Insurance subsidiary to Farmers Insurance Group for $1.9billion.
The week following the September bailout, AIG employees and distributors participated in a California retreat which cost $444,000 and featured spa treatments, banquets, and golf outings.
The American International Building in Lower Manhattan.AIG history dates back to 1919, when Cornelius Vander Starr established an insurance agency in Shanghai, China. Starr was the first Westerner in Shanghai to sell insurance to the Chinese, which he continued to do until AIG left China in early 1949as Mao Zedong led the advance of the Communist Peoples Liberation Army on Shanghai.
On 9 January 2013 AIGs board discussed joining a lawsuit against the United States government because the bailout they received was unir to their investors.
The United States Federal Reserve Bank announced the creation of a secured credit cility of up to US$85billion, to prevent the companys collapse by enabling AIG to meet its obligations to deliver additional collateral to its credit deult swap trading partners. The credit cility provided a structure to loan as much as US$85billion, secured by the stock in AIG-owned subsidiaries, in exchange for warrants for a 79.9% equity stake, and the right to suspend dividends to previously issued common and preferred stock.
On November 1, 2010, AIG announced it had raised $36.71billion from the sale of ALICO and an initial public offering for AIA (which included Philamlife). The company will use the proceeds Federal Reserve Bank of New York credit cility and make payments on other interests owned by the government.
CNN named Cassano as one of the Ten Most Wanted: Culprits of the 2008 financial collapse in the United States.
As of September 6, 2009, The Wall Street Journal reported that Pacific Century Group had agreed to pay $500million for a part of American International Groups asset management business, and that they also expected to pay an additional $200million to AIG in carried interest and other payments linked to future performance of the business.
In January, 2010, a document known as Schedule A List of Derivative Transactions was released to the public, against the wishes of the New York Fed. It listed many of the insurance deals that AIG had with various other parties, such as Goldman Sachs, Socit Gnrale, Deutsche Bank, and Merrill Lynch.
Austan Goolsbee, of the Council of Economic Advisers said I dont know why they would follow a policy thats really not sensible, is obviously going to ignite the ire of millions of people. and You worry about that backlash.
AIG collateral postings to credit deult swap counterparties
As of January 2012, TARP had about $50 billion invested in AIG according to one report. Break even for the government was figured at $28.73 a share v. then-current share price of about $25.
Had AIG been allowed to il in a controlled manner through bankruptcy, bondholders and derivative counterparties (major banks) would have suffered significant losses, limiting the amount of taxpayer funds directly used. Fed Chairman Ben Bernanke argued: If a federal agency had [appropriate authority] on September 16, [2008], they could have been used to put AIG into conservatorship or receivership, unwind it slowly, protect policyholders, and impose haircuts on creditors and counterparties as appropriate. That outcome would have been r preferable to the situation we find ourselves in now.
On March 15, 2009, under mounting pressure from Congress and after consultation with the Federal Reserve, AIG disclosed a list of major recipients of collateral postings and payments under credit deult swaps, guaranteed investment agreements, and securities lending agreements.
The Federal Reserve continued to meet that day with major Wall Street investment firms, hoping to broker a deal for a non-governmental $75billion line of credit to the company.
Circa 2010 the WSJ reported that a mily sued AIG for alleged complicity in a stranger-originated life insurance scheme, whereby AIG managers allegedly welcomed people without an insurable interest to take out life insurance policies against others. The case involved JB Carlson and Germaine Tomlinson, and was one of many similar lawsuits in the US at the time.
On June 11, 2008, three stockholders, collectively owning 4% of the outstanding stock of AIG, delivered a letter to the Board of Directors of AIG seeking to oust CEO Martin Sullivan and make certain other management and Board of Directors changes. This letter was the latest volley in what the Wall Street Journal deemed a public spat between the Companys Board and management, on the one hand, and its key stockholders, and former CEO Maurice Hank Greenberg on the other hand.
AIG agreed on March 8, 2010, to sell its American Life Insurance Co. unit (ALICO) to MetLife Inc. for $15.5billion in cash and stock by November 1, 2010. Alico has annuities, life and health insurance operations in Japan, Middle East (including Nepal, Bangladesh and Pakistan), Western and Eastern Europe, Latin America and the Caribbean. AIG said it will sell Alico for $6.8billion in cash and the remainder in MetLife equity. The deal leaves AIG as the second-largest shareholder of MetLife,Online Higher Education. with a stake of more than 20% in the company.
Federal officials said the $40billion investment would ultimately permit the government to reduce the total exposure to AIG to $112billion from $152billion.
AIG suffered from a liquidity crisis when its credit ratings were downgraded below AA levels in September 2008. The United States Federal Reserve Bank on September 16, 2008 created an $85billion credit cility to enable the company to meet increased collateral obligations consequent to the credit rating downgrade, in exchange for the issuance of a stock warrant to the Federal Reserve Bank for 79.9% of the equity of AIG. The Federal Reserve Bank and the United States Treasury by May 2009 had increased the potential financial support to AIG, with the support of an investment of as much as $70billion, a $60billion credit line and $52.5billion to buy mortgage-based assets owned or guaranteed by AIG, increasing the total amount available to as much as $182.5billion.
Federal Reserve Chairman Ben Bernanke said It makes me angry. I slammed the phone more than a few times on discussing AIG.
Lawrence Summers, Director of the National Economic Council, said The easy thing would be to just say, you know, Off with their heads, and violate the contracts, but you have to think about the consequences of breaking contracts for the overall system of law.
This was the largest government bailout of a private company in U.S. history, though smaller than the bailout of Fannie Mae and Freddie Mac a week earlier.
Main article: AIG bonus payments controversyIn March 2009, AIG announced that they were paying $165million in executive bonuses. Total bonuses for the financial unit could reach $450million and bonuses for the entire company could reach $1.2billion.
Protester outside 60 Wall Street Deutsche Banks US main office in the wake of the bonus controversy is interviewed by news media.Politicians on both sides of the Congressional aisle reacted with outrage to the planned bonuses. Senator Chuck Grassley (R-Iowa) said I would suggest the first thing that would make me feel a little bit better toward them if theyd follow the Japanese example and come before the American people and take that deep bow and say, Im sorry, and then either do one of two things: resign or go commit suicide.
AIG subsequently sold a number of its subsidiaries and other assets to pay down loans received, and continues to seek buyers of its assets.
The FRBNY announced that it would modify the September 16 secured credit cility; the Treasury investment would permit a reduction in its size from $85billion to $60billion, and that the FRBNY would extend the life of the cility from three to five years, and change the interest rate from 8.5% plus the three-month London interbank offered rate (LIBOR) for the total credit cility, to 3% plus LIBOR for funds drawn down, and 0.75% plus LIBOR for funds not drawn, and that AIG would create two off- balance-sheet Limited Liability Companies (LLC) to hold AIG assets: one to act as an AIG Residential Mortgage-Backed Securities Facility and the second to act as an AIG Collateralized Debt Obligations Facility.
On November 10, 2008, just a few days before renegotiating another bailout with the US Government for $40billion, ABC News reported that AIG spent $343,000 on a trip to a lavish resort in Phoenix, Arizona.
AP reported on October 17 that AIG executives spent $86,000 on a previously scheduled English hunting trip. News of the lavish spending came just days after AIG received an additional $37.8billion loan from the Federal Reserve, on top of a previous $85billion emergency loan granted the month before. Regarding the hunting trip, the company responded, We regret that this event was not canceled.
On September 30, 2010, AIG announced an agreement to sell two of its life insurance companies in Japan, AIG Star and AIG Edison, to Prudential Financial for $4.2billion in cash and $600million in the assumption of third party debt to help repay some of the money owed to the U.S. government.
AIG announced September 6, 2012, it was selling part of its stake, up to $2 billion dollars, in Asian insurer AIA Group Ltd. and plans to pay off more of its loans from the US government. The insurers board also approved the repurchase of up to $5 billion dollars of shares of its common stock from the US government.
Senator Jon Tester (D-Montana) said This is ridiculous. and AIG executives need to understand that the only reason they even have a job is because of the taxpayers.
and has suggested that if in future there is no improvement, it will invest more money into the company, as it is unwilling to allow it to il.
From mid September till early November, AIGs credit-deult spreads were steadily rising, implying the company was heading for deult.
On the evening of September 16, 2008, the Federal Reserve Banks Board of Governors announced that the Federal Reserve Bank of New York had been authorized to create a 24-month credit-liquidity cility from which AIG could draw up to $85billion. The loan was collateralized by the assets of AIG, including its non-regulated subsidiaries and the stock of substantially all of its regulated subsidiaries, and with an interest rate of 850 basis points over the three-month London Interbank Offered Rate (LIBOR) (i.e., LIBOR plus 8.5%). In exchange for the credit cility, the U.S. government received warrants for a 79.9 percent equity stake in AIG, with the right to suspend the payment of dividends to AIG common and preferred shareholders.
By December 2008, AIG had paid at least $18.7billion to various financial institutions, including Goldman Sachs and Socit Gnrale, to retire obligations related to credit deult swaps (CDS). As much as $53.5billion related to swap payouts are part of the bailout.
Further information: Holdings of American International GroupIn the United States, AIG is the largest underwriter of commercial and industrial insurance, and AIG acquired American General Life Insurance in August 2001.
Less than 24 hours after the news of the party was first reported by the media, it was reported that the Federal Reserve had agreed to give AIG an additional loan of up to $37.8billion.
Wikipedia® is a registered trademark of the Wikimedia Foundation, Inc., a non-profit organization.
Below is data from one of the charts AIG released, representing only a portion of the total payouts, over a period of a few months.
An additional $37.8billion credit cility was established in October. As of October 24, AIG had drawn a total of $90.3billion from the emergency loan, of a total $122.8billion.
AIG purchased American International Group ocean financethe remaining 39% that it did not own of online auto insurance specialist 21st Century Insurance in 2007 for $749million.
Maurice Greenberg, former CEO of AIG, on September 17, 2008, characterized the bailout as a nationalization of AIG. He also stated that he was bewildered by the situation and was at a loss over how the entire situation got out of control as it did.
The AIG Financial Products division headed by Joseph Cassano, in London, had entered into credit deult swaps to insure $441billion worth of securities originally rated AAA. Of those securities, $57.8billion were structured debt securities backed by subprime loans.
On September 14, 2008, AIG announced it was considering selling its aircraft leasing division, International Lease Finance Corporation, to raise cash.
Greenberg was succeeded as CEO by Martin J. Sullivan, who had begun his career at AIG as a clerk in its London office in 1970.
It was reported that Senator Christopher Dodd (D-Con) (who first denied, then admitted to amending the legislation to allow the AIG bonuses), received $160,000 from employees of AIG.
On September 16, 2008, AIG suffered a liquidity crisis following the downgrade of its credit rating. Industry practice permits firms with the highest credit ratings to enter swaps without depositing collateral with their trading counter-parties. When its credit rating was downgraded, the company was required to post additional collateral with its trading counter-parties, and this led to an AIG liquidity crisis. AIGs London unit sold credit protection in the form of credit deult swaps (CDSs) on collateralized debt obligations (CDOs) that had by that time declined in value.
AIG announced the same day that its board accepted the terms of the Federal Reserve Banks rescue package and secured credit cility.
Rating agencies Moodys and Standard and Poors downgraded AIGs credit ratings on concerns over likely continuing losses on mortgage-backed securities. The credit rating downgrade forced the company to deliver collateral of over $10billion to certain creditors and CDS counter-parties.
AIG was required to post additional collateral with many creditors and counter-parties, touching off controversy when over $100billion was paid out to major global financial institutions that had previously received TARP money. While this money was legally owed to the banks by AIG (under agreements made via credit deult swaps purchased from AIG by the institutions), a number of Congressmen and media members expressed outrage that taxpayer money was going to these banks through AIG.
With the ilure of the parent company and the continuing recession in late 2008, AIG rebranded its insurance unit to 21st Century Insurance.
On November 10, 2008, the U.S. Treasury announced it would purchase $40billion in newly issued AIG senior preferred stock, under the authority of the Emergency Economic Stabilization Acts Troubled Asset Relief Program.
AIG was the principal sponsor of English football club Manchester United from 20062010, and as part of the sponsorship deal, its logo was prominently displayed on the front of the clubs jerseys and other merchandise. The AIG deal was announced by Manchester United chief executive David Gill on April 6, 2006, for a British shirt sponsorship record 56.5million, to be paid over four years (14.1million a year). The deal became the most valuable sponsorship deal in the world in September 2006, after the renegotiation and subsequent degrading of the 15million-a-year deal Italian team Juventus had with oil firm Tamoil. During AIGs sponsorship, Manchester United enjoyed one of its most successful periods in history, winning the Premier League three consecutive years, two Football League Cups, and the UEFA Champions League.
On March 24, 2009, The New York Times printed the resignation letter of Jake DeSantis, executive vice president of AIGs financial products unit, to Edward M. Liddy, the chief executive of AIG. DeSantis stated he had nothing to do with the credit deult swaps, he lost much of his life savings in the form of deferred compensation invested in the capital of AIG Financial Products; he had agreed to work for an annual salary of $1 out of a sense of duty, that he was assured many times the bonuses would be paid in March 2009, and that he believed he and others were let down by Liddys lack of support. He also stated he was going to donate his bonus to those suffering from the global economic downturn.
In November 2004, AIG reached a US$126million settlement with the U.S. Securities and Exchange Commission and the Justice Department partly resolving a number of regulatory matters, but the company must still cooperate with investigators continuing to probe the sale of a non-traditional insurance product.
AIG since September 2008 has marketed its assets to pay off its government loans. A global decline in the valuation of insurance businesses, and the weakening financial condition of potential bidders, has challenged its efforts. If the U.S. government decides to continue to protect the company from lling into bankruptcy, it may have to take the assets itself in exchange for the loans, or offer further direct financial support.
The New York Times later reported that talks on Wall Street had broken down and AIG may file for bankruptcy protection on Wednesday, September 17.
On October 14, 2004 the New York State Office of Attorney General Eliot Spitzer announced that it had commenced a civil action against Marsh &dditional terms may apply. See Terms of Use for details.
from the period September 16, 2008 to December 31, 2008
even though initial estimates of the amount of the settlement were between $100billion and $400billion.
On March 1, 2010, insurance company Prudential confirmed that it was in advanced negotiations to buy the Asian operations of AIG.
A memo issued in 2006 by Joseph Cassano, AIG Financial Products chief executive, urged AIG employees to donate to Dodd, saying that as next in line to become chairman of the Senate Banking, Housing, and Urban Afirs Committee... Senator Dodd will now have the opportunity to set the committees agenda on issues critical to the financial services industry.
AIGs share prices had llen over 95% to just $1.25 by September 16, 2008, from a 52-week high of $70.13.
Senator Richard Shelby (R-Alabama) said These people brought this on themselves. Now youre rewarding ilure. A lot of these people should be fired, not awarded bonuses. This is horrible. Its outrageous.
Senator Chuck Schumer (D-New York) accused AIG of Alice in Wonderland business practices and said It boggles the mind. He has threatened to tax the bonuses at up to 100%.
On March 2, 2009, AIG reported a fourth quarter loss of $61.7bn (43bn) and revenue of −$23.7bn (−16.2bn) for the final three months of 2008. This was the largest quarterly loss in corporate history at that time.
responded to the planned payments by saying [I]ts hard to understand how derivative traders at AIG warranted any bonuses, much less $165million in extra pay. How do they justify this outrage to the taxpayers who are keeping the company afloat? and In the last six months, AIG has received substantial sums from the U.S. Treasury. Ive asked Secretary Geithner to use that leverage and pursue every legal avenue to block these bonuses and make the American taxpayers whole.
It was reported that the trip was a reward for top-performing life-insurance agents planned before the bailout.
On September 17, 2008, Federal Reserve Board chair Ben Bernanke asked Treasury Secretary Henry Paulson to join him, to call on members of Congress, to describe the need for a congressionally authorized bailout of the nations banking system. Weeks later, Congress approved the Emergency Economic Stabilization Act of 2008. Bernanke said to Paulson on September 17, We cant keep doing this. Both because we at the Fed dont have the necessary resources and for reasons of democratic legitimacy, its important that the Congress come in and take control of the situation.
On October 22, 2008, Lehman Brothers creditors who bought credit deult swaps to hedge against a Lehman bankruptcy settled those accounts. The net payments were $5.2billion
The Treasury Department suggested that the potential losses to the US and global economy would be extremely high if it were to collapse
In August 2010, Fortress Investment Group purchased 80% of the interest in financing company American General Finance.
Just before the bailout by the US Federal Reserve, AIG former CEO Maurice (Hank) Greenberg sent an impassioned letter to AIG CEO Robert B. Willumstad offering his assistance in any way possible, ccing the Board of Directors. His offer was rebuffed.
The news of the loss came the day after the U.S. Treasury Department had confirmed that AIG was to get an additional $30billion in aid, on top of the $150billion it has already received.
Main article: AIG Travel GuardAIG sells travelers insurance internationally through Travel Guard, headquartered in Stevens Point, Wisconsin.
On June 15, 2008, after disclosure of financial losses and subsequent to a lling stock price, Sullivan resigned and was replaced by Robert B. Willumstad, Chairman of the AIG Board of Directors since 2006. Willumstad was forced by the US government to step down and was replaced by Edward M. Liddy on September 17, 2008.
AIGs board of directors named Robert Benmosche CEO on August 3, 2009 to replace Mr. Liddy, who earlier in the year announced his retirement.
The announcement of the loss had an impact on morning trading in Europe and Asia, with the FTSE100, DAX and Nikkei all suffering sharp lls. In the US the Dow Jones Industrial Average fell to below 7000 points, a twelve-year low.
Due to the Q3 2011 net loss widened, so on November 3, 2011 the AIG shares has plunged 49 percent year to date. The insurers board has approved the share buyback of as much as $1 billion.
The firms position as not just a domestic insurer, but also one for small businesses and many listed firms, has prompted US officials to suggest its demise could be disastrous and the Federal Reserve said that AIG posed a systemic risk to the global economy.
As Lehman Brothers (the largest bankruptcy in U.S. history at that time) suffered a catastrophic decline in share price, investors began comparing the types of securities held by AIG and Lehman, and found that AIG had valued its Alt-A and sub-prime mortgage-backed securities at 1.7 to 2 times the values used by Lehman which weakened investors confidence in AIG.
On March 29, 2010, Bloomberg L.P. reported that after almost three months of delays, AIG had completed the $500million sale of a portion of its asset management business, branded PineBridge Investments, to the Asia-based Pacific Century Group.
On June 1, 2010 the deal iled because AIG would not accept the $30.5billion after Prudential lowered the amount by $5billion from the originally planned $35.5billion after Prudential shareholder discontent.
Beginning in 2005, AIG became embroiled in a series of fraud investigations conducted by the Securities and Exchange Commission, U.S. Justice Department, and New York State Attorney Generals Office. Greenberg was ousted amid an accounting scandal in February 2005; he is still fighting civil charges being pursued by New York state.
Representative Barney Frank (D-Massachusetts), Chairman of the House Financial Services Committee, said paying these bonuses would be rewarding incompetence
On January 21, 2009, it was announced that AIG would not be renewing its sponsorship of the club at the end of the deal in May 2010. It is not clear, however, whether or not AIGs agreement to run MU Finance will continue. American risk consulting firm Aon Corporation was named the clubs new principal sponsor on June 3, 2009, with its sponsorship of the club taking effect from the beginning of the 201011 season. The terms of the deal were not revealed, but it has been reported to be worth approximately 80million over four years.
Senator Dick Durbin (D-Illinois) said Ive had it. and The ct that they continue to do it while we pour in billions of dollars is indefensible.
It was listed on the Dow Jones Industrial Average from April 8, 2004 to September 22, 2008.
Also in 2009, AIG sold its operations in Colombia to Ecuadors Banco del Pichincha.
In 1962, Starr gave management of the companys lagging U.S. holdings to Maurice R. Hank Greenberg, who shifted its focus from personal insurance to high-margin corporate coverage. Greenberg focused on selling insurance through independent brokers rather than agents to eliminate agent salaries. Using brokers, AIG could price insurance according to its potential return even if it suffered decreased sales of certain products for great lengths of time with very little extra expense. In 1968, Starr named Greenberg his successor. The company went public in 1969.
The New York Attorney Generals investigation led to a $1.6billion fine for AIG and criminal charges for some of its executives.
American International Group, Inc.NYSE:AIG, also known as AIG, is an American multinational insurance corporation. Its corporate headquarters is reported as 180 Maiden Lane in New York City (was formerly in the American International Building in New York City). The British headquarters office is on Fenchurch Street in London, continental Europe operations are based in La Dfense, Paris, and its Asian headquarters office is in Hong Kong. According to the 2011 Forbes Global 2000 list, AIG was the 29th-largest public company in the world.
The Federal Reserve hired Morgan Stanley to determine if there are systemic risks to a financial ilure of AIG, and asked private entities to supply short-term bridge loans to the company. In the meantime, New York regulators allowed AIG to borrow $20billion from its subsidiaries.
On December 15, 2008, the Thomas More Law Center filed suit to challenge the Emergency Economic Stabilization Act of 2008, alleging that it unconstitutionally promotes Islamic law (Sharia) and religion. The lawsuit was filed because AIG provides Takaful Insurance Plans, which, according to the company, avoid investments and transactions that areun-Islamic.
