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NYFed Defends "Accuracy" Of AIG Deal

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The Fed is funny. Not Bernanke-funny but getting there. That whole controversy about them pushing AIG not to disclose some information, especially regarding its counterparties and how much money they got? Well, it wasn't that they refused to make the appropriate disclosures, but rather that they were trying to be accurate, hence edited some data. Oh, and also, blame it on the lawyers.

Some have also suggested that the FRBNY pressured AIG not to make required disclosures about material elements of the Maiden Lane III transactions, including that the counterparties received par value. This is also incorrect. It appears that this assertion is based, at least in part, on a misreading of emails among lawyers for the FRBNY and AIG.

In a statement released yesterday, the Fed said it decided to withhold details because it wasn't "precisely accurate" to say the banks were paid in full because "counterparties ultimately received slightly less than 100 percent of par value."
The banks were paid $26.8 billion and allowed to keep $35.1 billion in collateral on guarantees worth about $62.1 billion. As Bloomberg notes, that means the banks got about 99.7 cents on the dollar.
You would think that given the fact that the government shelled out $182 billion- out of sheer politeness at least - they could have taken the time to include that detail.
Then, the Fed goes on to also acknowledge the concern "recently expressed by some whether it improperly pressured AIG not to disclose the identities of the CDS counterparties and other commercially sensitive information."
Here's their answer, and really, you can't make this stuff up:

This concern has apparently arisen from an e-mail exchange between the FRBNY's counsel and AIG regarding whether the Maiden Lane III credit agreement and the shortfall agreement should be attached at all to AIG's December 2nd 8-K. Under SEC rules, when the material terms of an agreement are adequately described in the body of an 8-K, the agreement itself need not be attached to the 8-K as an exhibit. In an e-mail, counsel for the FRBNY suggested, as permitted by the SEC rules, that the agreements need not be attached to the 8-K as exhibits. AIG counsel responded in an e-mail, that although AIG agreed that it was not required to file the agreements with the 8-K, under the unique circumstances presented, AIG and its counsel preferred to attach the agreements to the 8-K. The FRBNY and its counsel did not pursue this point further, and AIG attached the agreements, but without Schedule A.

And, punchline:

Schedule A contains the names of the CDS counterparties from which Maiden Lane III purchased the CDOs, information that identifies the individual securities in the Maiden Lane III portfolio, and certain economic terms related to each such security. Because this type of data does not provide any additional information that would be material to AIG's security holders and because such data is routinely considered to be confidential, AIG determined that Schedule A need not be attached to its December 2nd 8-K, a position that the FRBNY supported.


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