The Rescue of American International Group Module F: The AIG Credit Facility Trust

Aidan Lawson ()
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Aidan Lawson: YPFS, Yale School of Management, https://elischolar.library.yale.edu/journal-of-financial-crises/

Journal of Financial Crises, 2021, vol. 3, issue 1, 177-207

Abstract: In September 2008, American International Group, Inc. (AIG) experienced a liquidity crisis. To avoid the insurance giant's bankruptcy, the Federal Reserve Bank of New York (FRBNY) extended an $85 billion emergency secured credit facility to AIG. In connection with the credit facility, AIG issued 100,000 shares of preferred stock, with voting rights equal to and convertible into 79.9% of the outstanding shares of AIG common stock, to an independent trust (the Trust) set up by the FRBNY. Three trustees held the stock for the sole benefit of the US Treasury, exercised the rights, powers, authorities, discretions, and duties of the preferred stock, and acted as the beneficial owner of AIG. On January 14, 2011, the Trust converted the preferred stock into AIG common stock, and, after transferring the common stock to the Treasury's General Fund, the Trust effectively dissolved. Over the next two years, Treasury sold the common stock in a series of six public offerings returning a profit to the government. The government's equity investment and the Trust were controversial, raising debate about nationalization, transparency, and independence of the Trustees.

Keywords: AIG; credit facility; equity; liquidity; preferred stock; trust; voting rights (search for similar items in EconPapers)
JEL-codes: G01 G28 (search for similar items in EconPapers)
Date: 2021
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