AIG to Shut Bank Accounts in Dodd-Frank Deposits Retreat

AIG to Shut Bank Accounts in Dodd-Frank Deposits Retreat

American International Group Inc. (AIG) will return funds to customers at its banking unit and shut their accounts amid a retreat from deposit-taking as the Dodd-Frank Act places limits on insurers.

AIG Federal Savings Bank “will no longer be servicing retail deposit accounts as of Sept. 30,” according to a letter to customers. “All accounts will be automatically closed as of that date and any funds, including all interest due on your accounts, will be returned.”

AIG is joining Principal Financial Group Inc. (PFG) in narrowing its focus ahead of rules that limit proprietary trading and investments in private-equity or hedge funds by insurers with deposit-taking banks. MetLife Inc. (MET), Hartford Financial Services Group Inc. and Allstate Corp. have sold deposits or retreated from banking as regulators increase oversight.

Bernanke should testify in AIG case, judge says

Bernanke should testify in AIG case, judge says

A judge said Federal Reserve Chairman Ben Bernanke should be required to testify in the lawsuit by the former chief of American International Group Maurice Greenberg, against the U.S. over the insurer’s 2008 bailout, Reuters reports.

Judge Thomas Wheeler of the U.S. Court of Federal Claims on Monday rejected the government’s effort to keep Bernanke from being subjected to a deposition by Greenberg’s Starr International Co.

Wheeler called Bernanke a “key witness” who can provide highly relevant testimony, given that he was a “central figure” in the decision to bail out AIG.

AIG Financial Products Probed By Ben Lawsky For Alleged Risk Failures

AIG Financial Products Probed By Ben Lawsky For Alleged Risk Failures

Last week, U.S. regulators preliminarily designated AIG as “systemic”, one of a handful of non-banks whose potential failure could threaten the nation’s financial system.

But the probe by the New York DFS, led by Benjamin Lawsky, could delay the company’s plans to fully put its toxic past behind it. Lawsky last year threatened to revoke the state banking license — the equivalent of a corporate death sentence — of Standard Chartered, a large U.K. bank, over alleged money-laundering violations.

Lawsky, who some bank attorneys privately said is the New York regulator they most fear, has set his sights on AIG, an insurer whose giant derivatives portfolio could once again damage the company and its stakeholders if not properly managed. As a result, AIG may be subject to heightened supervision, a prospect that may curb investing and limit earnings if DFS decides to rein in certain business lines or activities.

Schneiderman Won’t Seek Damages From Ex-AIG CEO Greenberg

Schneiderman Won’t Seek Damages From Ex-AIG CEO Greenberg

New York Attorney General Eric Schneiderman told a court he won’t pursue damages against ex- American International Group Inc. (AIG) Chief Executive Officer Maurice “Hank” Greenberg in a lawsuit dating back to 2005.

The state will still seek a court ruling banning Greenberg from participating in the securities industry or serving as an officer or director of a public company, according to a letter New York Solicitor General Barbara Underwood sent yesterday to the clerk of the New York State Court of Appeals.

Fed Lies On The Record To Protect Bank Of America, Pulls Testimony

Fed Lies On The Record To Protect Bank Of America, Pulls Testimony

In late 2010, in a superficially stunning move, Bank of America was sued by, among many others, the New York Fed over the biggest bogeyman for the bank’s balance sheet – its legacy portfolio of super toxic Countrywide mortgages it inherited in the worst M&A deal of all time (its purchase of CFC) and the inheritance of woefully inadequate mortgage issuance standards which ever since then (recall our prediction on this issue) has cost the bank billions in litigiation payments and reserves.  Obviously, the Fed had no concerns about collecting the money it itself creates, and it certainly doesn’t care about legality and criminal financial impropriety, so why was it among the list of plaintiffs? Simple: as we suggested back then, and as has since been proven correct, it was simply so that Bill Dudley’s henchmen have a first row view of everything going on in the putback litigation that has been the primary concern for BofA, but with a few of keeping the damage to a minimum. Sure enough, Ever since then the Fed has done everything in its power to mitigate potential losses to BofA as a result of Agent Orange selling hundreds of billions in biohazardous mortgages to anyone and anything with a pulse. It has gotten so bad that the Fed was last week caught lying under testimony, forcing the Fed to take back testimony in a parallel lawsuit between AIG and BofA, which has also involved the New York Fed, as a indirect guardian of BAC’s cash hoard.

The WSJ reports:

The Federal Reserve Bank of New York is having some trouble getting its story straight. A New York Fed employee took back testimony he previously gave in a legal clash between American International Group Inc. and Bank of America Corp. over about $10 billion in mortgage-investment losses, according to the big insurer in its newest federal-court filing in a lawsuit seeking compensation.

The testimony is part of a long-running battle between AIG and Bank of America over losses the insurer incurred after purchasing troubled mortgage bonds underwritten by Countrywide Financial Corp. and Merrill Lynch & Co., now part of the Charlotte, N.C., bank. The primary legal battle has been sidetracked by a dispute over who has the right to sue Bank of America.

AIG says it does. But the bank claims AIG gave up its rights to sue when it accepted a bailout by the New York Fed, which purchased the troubled securities in 2008 through a vehicle called Maiden Lane II.

To help decide the dispute, AIG and Bank of America have sought depositions from New York Fed employees who were involved in the bailout.

Bank of America previously cited December 2012 testimony from James Mahoney, one of the New York Fed’s lead negotiators on the Maiden Lane II deal.

Mr. Mahoney said that when the Fed bailed out AIG, it intended to receive the rights to all future legal claims.

But on March 18, Mr. Mahoney told AIG’s lawyers: “I was really just concerned about moving all the upside and recourse over to the Fed. I didn’t contemplate taking something away.”

He also said he never discussed with anyone the idea that “AIG was somehow giving up its [tort] claims.”

Mr. Mahoney explained the discrepancy in his testimony by saying he spent “less than 10 minutes” discussing a document prepared by Bank of America that asserted AIG had given up all legal claims in the bailout.

Rest here…

Shareholders Certified to Sue AIG Over Bailout

(CN) – A federal judge certified two classes challenging the government’s bailout of American International Group at the brink of the 2008 financial collapse.
     AIG, a financial services company, faced “significant liquidity pressures” in the summer of 2008, according to a report from the Federal Reserve, as U.S. financial and credit markets began to sag under the weight of subprime mortgage delinquencies. Failure seemed imminent after similar problems felled the investment bank Lehman Brothers Holdings.
     Many feared, however, that AIG’s widespread dealings with financial institutions would cause unsustainable ripples beyond Wall Street. The U.S. government in turn gave AIG an $85 billion revolving credit line in exchange for a 79.9 percent equity stake.
     Meanwhile federally appointed trustees also oversaw a 1-for-20 reverse stock split approved by AIG’s board of directors.

Read on.

Records of AIG Securities Fraud Probe Stay Sealed

Records of AIG Securities Fraud Probe Stay Sealed

 (CN) – American International Group need not give the press access to confidential records relating to an independent review of its transactions, the D.C. Circuit ruled.
     After the Securities and Exchange Commission charged AIG with securities violations in 2004, the bank had to adopt reforms that would prevent future violations. AIG entered into a consent decree requiring it to disgorge assets for a victim restitution fund, establish a transaction-review committee, and hire an independent consultant to review its policies and past transactions. The decree required the consultant to prepare reports of the findings and conclusions.
     A federal judge declared the independent review reports confidential, and ruled they could be disclosed only “for good cause shown,” as determined by the court.
     In 2011, Sue Reisinger, a reporter for Corporate Counsel and American Lawyer magazines, sought access under the Freedom of Information Act to the consultant’s reports, asserting common law and First Amendment rights of access.

Despite opposition from AIG and the Securities and Exchange Commission, the court ordered public disclosure of redacted copies of the reports.

Ex- CEO AIG’s Greenberg Thumbs Nose at U.S. Taxpayers in Book

If you’re among the U.S. taxpayers who watched in horror as $182 billion of your money made its way to the collapsing insurance giant American International Group Inc. (AIG) during the financial crisis, it might come as a surprise to learn that your forced munificence didn’t make much of a difference.

In his new book, “The AIG Story,” former chief executive Maurice “Hank” Greenberg offers his take on what kept the company alive: “It was saved only by the loyalty and tenacity of its valiant workforce,” he says.

Read on.

AIG sues NY Fed over right to sue Bank of America, others

NEW YORK, Jan 11 (Reuters) – American International Group Inc has filed a lawsuit against a vehicle created by the Federal Reserve Bank of New York to help bail out the insurer, in a bid to preserve its right to sue Bank of America Corp and other issuers of mortgage debt that went sour.

The complaint, filed in the New York State Supreme Court in Manhattan, seeks a declaration that AIG has not transferred billions of dollars of “litigation claims” to Maiden Lane II, including many related to the insurer’s $10 billion lawsuit against Bank of America.

Maiden Lane II was created in December 2008 to buy residential mortgage-backed securities (RMBS) from AIG and ease liquidity strains.

According to the complaint, New York Fed officials in December told Bank of America that Maiden Lane II had, by agreeing to buy the securities, assumed from AIG all litigation claims relating to what it bought. AIG said this included more than $7 billion of damages claims against Bank of America.

AIG is not seeking monetary payments in the lawsuit, but wants the court to clarify that the New York-based insurer still has the right to sue issuers of securities in Maiden Lane II.

Rest here…

AIG may become systemically significant bank

Insurance giant American International Group ($33.56 0.3%), which became a troubled institution in the wake of the subprime crisis, could be classified as a systemically important financial institution under new Dodd-Frank reform rules, the Los Angeles Times reported Tuesday.

Taxpayers still have a significant stake in the firm, which was bailed out by the Treasury back in 2008.

Firms classified as systemically significant face more Federal Reserve oversight, including requirements forcing them to boost capital reserves.

Click here to read more.