AIG's former CEO continues to question government loan

By Lisa Kerner

Charlotte, N.C., Dec. 16 - The former chief executive officer of American International Group, Inc., Maurice R. Greenberg, questioned the last change in the terms of AIG's federal government loan in a letter to current CEO and chairman Edward Liddy.

According to Greenberg, one of the Maiden Lane special-purpose vehicles purchased approximately $50 billion of collateralized debt obligations at par and canceled the default swaps.

"It is hard to believe that the counterparties would be carrying the CDOs at par and not have marked them to market," Greenberg said in the letter. "If so, what is the rationale for buying them back at par?"

Greenberg said the counterparties were advised to keep the roughly $35 billion of collateral that had been transferred to them while AIG wrote down the CDOs to reflect their underlying value, which was about 50%.

"It certainly seems it was very good for the counterparties," said the letter, which was included in a schedule 13D/A filed with the Securities and Exchange Commission.

In a prior letter, Greenberg asked Liddy to answer several questions including:

• Where did the $35 billion of cash collateral come from that was used for the purchase of $70 billion of notional amount of credit default swaps? and

• Who are those counterparties, and what else was paid to them?

In October, Greenberg urged the New York financial and insurance services company to consider a "plan B" bailout in which the current federal loan would be converted into a senior preferred security.

The Federal Reserve Bank of New York agreed to lend up to $85 billion to AIG and later agreed to lend up to an additional $38 billion. AIG was also given access to another $20.9 billion through the Fed's commercial paper program.

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