Excerpts from the depositions - Wall Street Journal

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Case 2:11-cv-10549-MRP-MAN Document 254-1 Filed 03/28/13 Page 20 of 35 Page ID #:16609 the RMBS that it then sold to ML II. Am I correct, sir, you don’t recall any such discussions even with Mr. Mahoney? A. No, I don’t recall. I do not recall that topic coming up.” 108:24–109:12. • “Q. And I take it that Mr. Mahoney has never raised the issue with you at any point in time, correct? A. No. Q. I’m correct? A. Yes, correct.” 121:9–14. • “Q. Have you ever heard anyone, through today, within the New York Fed, ever say that in connection with the Maiden Lane II transaction, AIG somehow gave up or gave away its claims to pursue against the bank counterparties that initially sold it its RMBS? [Instruction] A. Oh, I really do not recall this topic coming up.” 117:23–118:12. • “Q. Have you ever had conversations with anybody about that subject matter? A. Yes. Q. Okay. And would that be counsel? A. Yeah. Q.[] Other than counsel, I take it you haven’t had conversations with anybody? A. I don’t remember having a conversation about this. Q. And the conversations that you had with counsel, how recent were those? A. A week or two ago maybe.” 119:5–17. • “Q. Would it be correct, then, at least from your standpoint when you entered into—the New York Fed, when it entered into the Maiden Lane II transaction, you did not have an understanding that AIG was in any way giving up legal claims that it might have to pursue against the banks that had sold it the RMBS issue that it was now selling on to ML II? [Objection] A. So, we didn’t have—I just don’t recall this topic coming up.” 122:3–18. • “Q. [Regarding negotiating the APA] And so, if it contained language that refers to ‘all right, title and interest and related instruments,’ you’re not familiar with that language? A. That is correct.” 232:6–10. Manzari testified that ML II was always a sale of securities—and nothing else. • Manzari understood ML II to be a sale of securities—and nothing else. • “Q. It was your understanding that what was being proposed is that the assets that would be sold by AIG to Maiden Lane II was a pool of residential mortgagebacked securities, correct, sir? A. Yes. Q. Anything else? A. I don’t think so.” 98:3–10. • The Board of Governors approved the purchase of RMBS by ML II—and nothing else. • “Q. But roughly, when did you understand the authorization had already been given to execute the Maiden Lane II transaction? A. I believe —the formal authorization happened with a—by the Board of Governors some time—in early November shortly prior to sort of the announcement of all the transactions.” 116:13–21. • “Q. And they were also authorizing that what Maiden Lane II would be purchasing were AIG’s residential . . . mortgage-backed securities, correct, sir? A. Yes, that’s right.” 254:23–255:5. EXHIBIT 3 2
Case 2:11-cv-10549-MRP-MAN Document 254-1 Filed 03/28/13 Page 21 of 35 Page ID #:16610 • The loan to ML II was to be repaid by cash flows and asset sales—and nothing else. • “Q. The loan would be paid—would be repaid by virtue of cash flows from the underlying mortgages within the residential mortgage-backed securities as one source, correct? A. Yes. Q. And the other source being the sale of those securities, correct? A. That’s right. Q. And that’s it, correct, as far as you understood it? A. I—yes. I don’t know how else Maiden Lane II would have gotten repaid.” 255:25–256:13. • The FRBNY and its advisors determined the price for AIG’s RMBS based on the value of the securities’ cash flows—and nothing else. • “A. [W]e had BlackRock run, using its own fair value process on the firm— on those same securities.” 60:16–19. • “Q. [T]he cash flows that you talked about coming out of the underlying loan pools, would be the cash flow that’s generated from [] the principal—principal payment of the mortgages, correct? A. Yes, They—it would be the underlying interest and principal payments that flow through the [underlying] mortgage pools as a result of just about any of the consumer behavior that generates cash flows out of mortgages.” 62:25–63:13. • “Q. So, to be clear, the price that was determined by the modelling to arrive at fair value was based upon modelling of the expected future cash flows generated by the underlying mortgages with some discount factor being applied back, correct, sir? A. That’s right. Q. And that’s what your understanding was in the totality of how that market value pricing was arrived at, correct, sir? A. That’s right.” 67:10–20. • “Q. In your understanding, did the model that BlackRock used to determine fair value take into account any risk associated with possible fraud in the issuance of the securities? [Objection] A. I don’t believe it would have.” 225:22–226:6. • The FRBNY’s loan to ML II was fully secured by RMBS—and nothing else. • “Q. And in connection with the $85 billion credit facility that was extended to AIG on September 16 th , that credit facility, to your knowledge, was in compliance with 13.3; that is, the Fed believed that it was secured to its satisfaction? A. Yes, that’s correct.” 237:16–23. • “Q. And am I correct that the same 13.3 issues existed; that is, that the Fed had to be satisfied that the loan to Maiden Lane II was fully secured at least to the Fed’s satisfaction? [Objection] A. That’s right. Q. And in fact, once the loan was made, can we take that as the strongest indicia that the Fed was satisfied that it was fully secured to its satisfaction? [Objection] A. The—yes, we believed that we were secured to our satis—I believe we were secured to our satisfaction. Q. And that’s because you had a—‘you’ meaning the New York Fed, had a, as collateral, the assets of Maiden Lane II, correct? A. Yes. The RMBS that w[ere] purchased from AIG. Q. Okay. So, the residential mortgage-backed securities that had been sold into Maiden Lane II was the collateral that gave the New York EXHIBIT 3 3
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Excerpts from the depositions - Wall Street Journal

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