The AIG finance has almost all gone, nowdays AIG is only insurance, also, its market cap has dropped to about half of its size in 2007. Can AIG follow Metlife and GE to drop its SIFI label? WSJ reports that it might come soon as Friday.
If it happens, AIG might can start the growth engine pretty soon. I need to watch out for buying opportunity. The chance of success is like 50-50 to me according to the news.
WSJ report,
U.S. Considers Dropping Federal Oversight of AIG
Regulators to discuss removing ‘systemic’ tag from insurer on Friday
Removing stricter oversight of AIG would be a symbolic step: The insurer was at the center of the global markets meltdown in 2008 and was effectively nationalized through a nearly $185 billion government bailout.PHOTO: /REUTERS
By
Ryan Tracy and
Leslie Scism
U.S. officials are considering whether to remove federal oversight of insurer American International GroupInc.,AIG 0.63% according to people familiar with the matter.
The Financial Stability Oversight Council, a group of senior regulators, was set to discuss the matter at a meeting Friday, these people said. No final decision has been made, and the outcome of the discussion isn’t certain, they said.
It is possible the council could decide not to vote on the matter Friday, delaying the decision until a future meeting.
Removing stricter oversight of AIG would be a symbolic step: The company was at the center of the global markets meltdown in 2008 and was effectively nationalized through a government bailout that topped $180 billion. That made it a poster child for financial excesses, and was one of the reasons for the creation of the oversight council in the 2010 Dodd-Frank financial regulatory law.
In 2013, the oversight council determined AIG posed a risk to the economy and designated it a “systemically important financial institution,” or SIFI. It was the first time the council had used its main Dodd-Frank power. The label subjects AIG to stricter oversight than it would otherwise face, including supervision by the Federal Reserve.
The oversight council is required to review SIFI designations each year. Under the Trump administration, discussions about whether to remove the tag have become more active this year, the people familiar with the matter said.
To remove the SIFI label, officials would have to determine that distress at AIG no longer poses a risk to U.S. financial stability.
The company is about half the size it was during the government rescue, slimming down to $499.76 billion in total assets as of June 30, from $1.048 trillion in 2007. It has divested itself of dozens of businesses, though it remains one of the biggest sellers of property-casualty insurance to businesses world-wide, and is also a major seller of life insurance and retirement-income products in the U.S.
Its turnabout was hard to imagine in 2008, when many government officials and industry executives expected it to go out of business.
U.S. officials said the rescue of a teetering AIG was needed because the company was so financially interwoven with other firms globally that its collapse could have unforeseeable effects. The bailout’s initial terms proved so harsh for AIG that the aid package was later restructured.
For many years, AIG had taken a glass-is-half-full approach to its SIFI designation, even as competitor MetLifeInc. successfully overturned its designation in federal court, arguing it had been unfairly applied and was harmful to its competitive position.
Former AIG Chief Executive Peter Hancock repeatedly emphasized that the global insurer needed a lead regulator, and the Fed fit the bill, referring to the central bank as a “helpful partner.” Mr. Hancock also disputed that the Fed was hampering the company with too-tough capital requirements, saying that AIG aspired to high standards of its own choice to maintain solid credit and financial-strength ratings.
Mr. Hancock left the company earlier this year and was succeeded by industry veteranBrian Duperreault. In an August earnings call, Mr. Duperreault signaled a change in approach, reflecting AIG’s years of shrinkage and efforts to improve risk controls.
He responded to a question about the SIFI designation by saying that AIG today “would not meet the hurdles” for the label. “This company has dramatically changed its risk profile and controls since the financial crisis,” he said. “We will continue to work with our numerous regulators to demonstrate the substantial and successful de-risking that AIG has achieved,” he added.
AIG’s rescue was so high-profile and controversial that people in public policy say it helped usher in significant changes in the nation’s politics. On the right, the federal government’s intervention in the economy helped spawn the tea-party movement. On the left, it helped seed the Occupy Wall Street movement, which contended the government aided rich bankers while giving short shrift to struggling homeowners, among other things.
The Financial Stability Oversight Council currently has 10 voting members, including the Treasury Secretary and the heads of major regulators such as the Fed. Five were appointed by President Barack Obama and five by President Donald Trump. The Obama appointees may be more inclined to maintain federal oversight of AIG.
It will take a two-thirds vote of the oversight council to remove AIG’s SIFI designation, and people familiar with the matter said they were uncertain Thursday how a vote would play out.
Seven of the 10 voting members would typically have to elect to rescind the SIFI tag, but Securities and Exchange Commission Chairman Jay Clayton may need to recuse himself from the AIG vote, some of the people said, because his former law firm Sullivan & Cromwell LLP counts AIG as a significant client. Council members have been discussing how Mr. Clayton’s potential recusal would affect a vote, people familiar with the matter said.
A spokesman for Mr. Clayton declined to comment Thursday.
”If they decide to keep it a SIFI, it will be based upon politics, based upon notions of what AIG used to be, which is dramatically different from today’s AIG,” said Thomas Russo, who was a general counsel at AIG during the turnaround, from 2010 to 2016.
AIG is pushing hard to shed its “too big to fail” status, ahead of a crunch vote that could boost the Trump administration’s attempt to undo Obama-era reforms.
The New York-based insurance company was one of several non-banks that was classed as a systemically important financial institution in 2013, on the grounds that its collapse could pose a serious threat to the stability of the financial system. Ever since, AIG has been selling assets and tweaking its funding mix, partly to rid itself of the Sifi label, which brings with it extra-close supervision from the Federal Reserve.
Now the insurer has stepped up its campaign, according to people familiar with the effort. At second-quarter results last month Brian Duperreault, chief executive, said the slimmed-down company no longer “meet[s] the hurdles” for the Sifi designation, after “dramatic” changes to its risk profile and controls.
The body with the power to anoint Sifis, the Financial Stability Oversight Council, is due to discuss the AIG case on Friday. But a vote on whether to remove the designation could be close, said people familiar with the situation.
AIG would need the support of seven of the 10 voting members of the FSOC, primarily the heads of the major federal financial regulatory agencies. Of those, two are believed to be opposed to the idea of removing the Sifi label (Martin Gruenberg, chairman of the Federal Deposit Insurance Corporation, and Richard Cordray, director of the Consumer Financial Protection Bureau) while another (Melvin Watt, director of the Federal Housing Finance Agency) appears unlikely to give the nod. All three are Democrats, who were appointed by Barack Obama.
AIG and the agencies declined to comment.
The verdict could rest on whether Jay Clayton, the Securities and Exchange Commission chairman appointed by President Donald Trump in June, is able to cast a vote. The last meeting of the FSOC in late July descended into “chaos”, according to two people familiar with proceedings, as members were unable to agree on whether Mr Clayton — who worked at a law firm, Sullivan & Cromwell, with ties to AIG — could nominate another commissioner to vote on his behalf. The other two commissioners are Kara Stein, a Democrat, and Republican Michael Piwowar.
People close to AIG hope there are enough votes to get over the line.
“If this administration believes that unnecessary regulation hampers growth, [rescinding AIG’s Sifi status] should be a shining example of it,” said Tom Russo, former general counsel of AIG, who retired last November. “If you can’t make this decision, you have to ask yourself how serious they are about that concept.”
Steven Mnuchin, Treasury secretary, who chairs the FSOC, has been a consistent critic of post-crisis reforms, blaming heavy regulation for the sluggish economic recovery of the past decade. Next month the Treasury department is expected to produce a report on the Sifi designation process and the role of the FSOC.
In the past, Republicans have characterised the FSOC as being a symbol of the Washington insider system: powerful government bureaucrats taking “arbitrary” decisions behind closed doors, awarding themselves the power to pick winners and losers.
People familiar with AIG’s stance say the company had argued for a while that the designation was unfair, but began to put its case more forcefully in May, when Mr Duperreault succeeded Peter Hancock as chief executive.
If rejected, AIG may have to wait until more Trump appointees are in place at the FSOC. In November, for example, Mr Gruenberg is due to leave the FDIC.
Currently, two companies carry the Sifi designation — AIG, which has $500bn in assets, and Prudential Financial, with $813bn. In June last year the FSOC voted to strip GE Capital of the Sifi tag, satisfied that the Norwalk, Connecticut-based company had done enough to cut itself down to size.
MetLife was also named a Sifi but challenged the FSOC in federal court and won. The FSOC has appealed against that decision.
According to wiki, here are the 10 voting members of FSOC,
My name is Samual Lau. I am a long-term value investor and a zealous disciple of Ben Graham. And I am a MBA graduated in May 2010 from Carnegie Mellon University. My concentrations are Finance, Strategy and Marketing.
TimelessInvestor
It is possible that AIG will drop SIFi label tomorrow?
The AIG finance has almost all gone, nowdays AIG is only insurance, also, its market cap has dropped to about half of its size in 2007. Can AIG follow Metlife and GE to drop its SIFI label? WSJ reports that it might come soon as Friday.
If it happens, AIG might can start the growth engine pretty soon. I need to watch out for buying opportunity. The chance of success is like 50-50 to me according to the news.
WSJ report,
U.S. Considers Dropping Federal Oversight of AIG
Regulators to discuss removing ‘systemic’ tag from insurer on Friday
By
U.S. officials are considering whether to remove federal oversight of insurer American International Group Inc., AIG 0.63% according to people familiar with the matter.
The Financial Stability Oversight Council, a group of senior regulators, was set to discuss the matter at a meeting Friday, these people said. No final decision has been made, and the outcome of the discussion isn’t certain, they said.
It is possible the council could decide not to vote on the matter Friday, delaying the decision until a future meeting.
Removing stricter oversight of AIG would be a symbolic step: The company was at the center of the global markets meltdown in 2008 and was effectively nationalized through a government bailout that topped $180 billion. That made it a poster child for financial excesses, and was one of the reasons for the creation of the oversight council in the 2010 Dodd-Frank financial regulatory law.
In 2013, the oversight council determined AIG posed a risk to the economy and designated it a “systemically important financial institution,” or SIFI. It was the first time the council had used its main Dodd-Frank power. The label subjects AIG to stricter oversight than it would otherwise face, including supervision by the Federal Reserve.
The oversight council is required to review SIFI designations each year. Under the Trump administration, discussions about whether to remove the tag have become more active this year, the people familiar with the matter said.
To remove the SIFI label, officials would have to determine that distress at AIG no longer poses a risk to U.S. financial stability.
The company is about half the size it was during the government rescue, slimming down to $499.76 billion in total assets as of June 30, from $1.048 trillion in 2007. It has divested itself of dozens of businesses, though it remains one of the biggest sellers of property-casualty insurance to businesses world-wide, and is also a major seller of life insurance and retirement-income products in the U.S.
Its turnabout was hard to imagine in 2008, when many government officials and industry executives expected it to go out of business.
U.S. officials said the rescue of a teetering AIG was needed because the company was so financially interwoven with other firms globally that its collapse could have unforeseeable effects. The bailout’s initial terms proved so harsh for AIG that the aid package was later restructured.
AIG fully repaid taxpayers by the end of 2012. Its divestitures included crown-jewel life-insurance operations that spanned the globe and the sale of one of the world’s biggest aircraft-leasing businesses. More recently, it sold a mortgage-insurance unit.
For many years, AIG had taken a glass-is-half-full approach to its SIFI designation, even as competitor MetLife Inc. successfully overturned its designation in federal court, arguing it had been unfairly applied and was harmful to its competitive position.
Former AIG Chief Executive Peter Hancock repeatedly emphasized that the global insurer needed a lead regulator, and the Fed fit the bill, referring to the central bank as a “helpful partner.” Mr. Hancock also disputed that the Fed was hampering the company with too-tough capital requirements, saying that AIG aspired to high standards of its own choice to maintain solid credit and financial-strength ratings.
He responded to a question about the SIFI designation by saying that AIG today “would not meet the hurdles” for the label. “This company has dramatically changed its risk profile and controls since the financial crisis,” he said. “We will continue to work with our numerous regulators to demonstrate the substantial and successful de-risking that AIG has achieved,” he added.
AIG’s rescue was so high-profile and controversial that people in public policy say it helped usher in significant changes in the nation’s politics. On the right, the federal government’s intervention in the economy helped spawn the tea-party movement. On the left, it helped seed the Occupy Wall Street movement, which contended the government aided rich bankers while giving short shrift to struggling homeowners, among other things.
The Financial Stability Oversight Council currently has 10 voting members, including the Treasury Secretary and the heads of major regulators such as the Fed. Five were appointed by President Barack Obama and five by President Donald Trump. The Obama appointees may be more inclined to maintain federal oversight of AIG.
It will take a two-thirds vote of the oversight council to remove AIG’s SIFI designation, and people familiar with the matter said they were uncertain Thursday how a vote would play out.
Seven of the 10 voting members would typically have to elect to rescind the SIFI tag, but Securities and Exchange Commission Chairman Jay Clayton may need to recuse himself from the AIG vote, some of the people said, because his former law firm Sullivan & Cromwell LLP counts AIG as a significant client. Council members have been discussing how Mr. Clayton’s potential recusal would affect a vote, people familiar with the matter said.
A spokesman for Mr. Clayton declined to comment Thursday.
”If they decide to keep it a SIFI, it will be based upon politics, based upon notions of what AIG used to be, which is dramatically different from today’s AIG,” said Thomas Russo, who was a general counsel at AIG during the turnaround, from 2010 to 2016.
Write to Ryan Tracy at ryan.tracy@wsj.com and Leslie Scism at leslie.scism@wsj.com
From Financial Time
The FT:
According to wiki, here are the 10 voting members of FSOC,
Voting Members[edit]
The Financial Stability Oversight Council has ten voting members:[23]
Current Voters
About Timeless Investor
My name is Samual Lau. I am a long-term value investor and a zealous disciple of Ben Graham. And I am a MBA graduated in May 2010 from Carnegie Mellon University. My concentrations are Finance, Strategy and Marketing.