Dinallo: Feds Will Remain Patient With AIG Woes continue

 

Thursday, Mar 05,2009, 5:30:34 PM   Click:

H Copyright 2009 Best Company, Inc.All rights reserved BestWire

26 February 2009 Thursday 05:01 PM EST

539 words


Dinallo: Feds Will Remain Patient With AIG Woes continue

Al Slavin

NEW YORK



New York's top insurance suggested that the federal government remains committed to provide American International Group Inc. more time to work through its financial maelstrom.

Eric Dinallo, head of New York Insurance Department, said he remains a lawyer to pursue a plan that calls for the sale of assets of the insurer. The product should repay the capital that has been extended through what has become a $ 150 billion federal rescue plan and the federal government has given 80% of the company's shares.

"(CEO Ed Liddy AIG) is in a very difficult situation because time costs money, because of the loan," said Dinallo. "I think the markets are frozen for operations leverage to expect in May Now maybe the federal government has done some methodology continued to give him the maximum time. That's all I can say. "

In a speech to the PLUS D & O Symposium, Dinallo said he had no information. It was to base his opinion on the federal government apparent reluctance to nationalize the banking system.

"I think there is a commitment to get this right," said Dinallo.

AIG has experienced difficulties in the sale of assets because of the harsh financial climate. Dinallo was not optimistic about the possibility of leaving the contenders to offset the cost of stocks, citing depressed values of the sector in the stock. But he stressed that the operating companies within the AIG fold remains solvent.

"I believe that there is a strong solvency and appropriate claims for payment in the ability of operating companies, as I know," he said.

Dinallo said AIG the next earnings report could be the sign of the insurance industry because it will follow the more stringent accounting standards or generally accepted accounting principles. Dinallo said GAAP have been "less forgiving" on how the deficiencies are tabulated in comparison with standard accounting principles used by regulators.

Dinallo said something to look at the benefit will be AIG Financial Products division, part of the company he said was worth $ 460 billion of credit default swaps. He said he would have been easy to drop the whole company into bankruptcy in September when AIG reported that, pending the note, there should be a lower capital expenditure.

Although these CDs have been regulated, Dinallo said an undetermined amount of unregulated swaps were written against the company's viability. "So the world is there, written CDS bets on whether AIG is going to fail or not," said Dinallo.

Dinallo said potential losses of the unregulated CDS at the time were incalculable and would come in the wake of the collapse of Lehman Bros. He said he was a broader question of whether there was enough cash to cover these losses.

After the speech, said Dinallo ultimate question involves whether there are sufficient assets to cover loans.

"The federal government has clearly indicated that it will not fix the privileges of the insurance companies," he said. "So, insurance companies, either alone or as part of transactions."

(By Al Slavin, senior editor, Best's Review)

27 February 2009

Copyright © 2009 LexisNexis, a division of Reed Elsevier Inc.. All rights reserved
Terms and Conditions Privacy Policy