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AIG Details Troubled Derivatives

Sourc: WSJ

Posted on 01 Feb 2010

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American International Group Inc. (AIG) on Friday released information on the derivatives transactions that helped force the company into the arms of a government bailout.

AIG said in a Securities and Exchange Commission filing that it was releasing the unredacted documents "due to recent public disclosure of the full contents of Schedule A," a detailed listing of $62.1 billion in notional value derivative transactions its financial products group wrote.

The Federal Reserve Bank of New York told AIG not to disclose key details of the agreements to make big payouts to banks in the insurer's regulatory filings in late 2008, according to email exchanges released by Rep. Darrell Issa (R., Calif.), ranking minority member of the House Committee on Oversight and Government Reform, the Wall Street Journal said earlier this month.

Rep. Issa made the unredacted Schedule A public on Wednesday, and he said on Friday he was pleased AIG had also made the information public.

"To justify keeping these details hidden from the American public, the N.Y. Fed suggested that the sky would fall should this information become public," Rep. Issa said in a statement. "Public disclosure and transparency should be treated as a first priority."

An AIG spokesman said he had no comment on Rep. Issa's remarks.

A New York Fed spokesman referred to testimony by Thomas Baxter, general counsel of the New York Fed, who said in January that there was no effort to mislead the public.

The documents are part of a 2008 shortfall agreement between AIG's financial-products group and Maiden Lane III LLC, the entity set up to purchase the derivatives portfolio.

The deals were paid off at face value as part of AIG's government bailout, despite big mark-downs in the value of most of the transactions.