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 8 of 35 Page ID #:16597 Swift testified that had AIG been transferring fraud claims to ML II, he would have wanted to present that to the state insurance regulators. • “Q. What was your role in making presentations to insurance regulators about the ML II transaction? A. Yeah, I was the lead spokesperson for AIG’s Life and P[&]C companies on the securities lending matter. Q. And what type of oversight, what type of information did the regulators want to hear from you as the principal presenter? [Objection ] A. They want―they wanted, and expected, transparency on anything significant.” 99:13–100:2. • “Q. [Discussing presentation to insurance regulators] Is there any reference to the assignment of fraud claims to ML II in Exhibit 77? A. No. Q. In making your presentations to insurance regulators, how did you describe the assets that AIG was selling to ML II? A. Throughout the various pages in here, you can see that we were―we―we were referring to the assets, . . . either as the RMBS assets or the non-RMBS assets. . . . [T]he RMBS assets, as it related to the ML II transaction, were described as residential mortgage-backed securities. Q. And did you say anything to the regulators that might suggest fraud claims were being assigned? A. No.” 101:3–102:2. • “Q. If you had believed that fraud claims were assigned to ML II, what, if anything, would you have done differently in your presentations to insurance regulators? A. At minimum, I probably would have had a bullet point just talking through it as―as a deal point. Q. Why? A. I think, again, if―if you really understand the nature of the securities lending pool, these were the assets and obligations of the underlying insurance company’s balance sheets. And if AIG gave up that right and obligation, the insurance commissioners will want to know about a future monetizable asset, or future recovery that was also, you know, given up. So, anyway, it would have just been a significant part of the overall transaction we would have talked about.” 102:3–23. Swift testified that ML II was intended to stabilize AIG while ensuring the FRBNY would be repaid. • “Q. In structuring this Maiden Lane II transaction, what was your understanding of the objective as to AIG going forward? [Objection] A. I mean, the objective of AIG was to stabilize, continue to stabilize, you know, the organization with a solution to a program that―that created large credit losses and some inherent volatility in its equity position. Q. So, to put it in more simple terms: Was the transaction part of a solution to help AIG recover from the financial crisis? A. I believe so.” 120:14–121:4. • “A. The Fed made it very clear that it was a lender. It was intent on having its loan repaid, and it used BlackRock and us to give them comfort that, under various economic conditions and scenarios, their loan would be repaid. They made it very clear that they had never had a loss on a loan they made, and they never intend to have a loss on a loan that they made.” 82:7–16. • “A. That was the Fed’s primary objective, was to always be viewed as the lender, and they never were going to be allowed/permitted to incur a loss. Q. Did you understand why this transaction resulted in a very low likelihood of failing to repay the EXHIBIT 1 7
Case 2:11-cv-10549-MRP-MAN Document 254-1 Filed 03/28/13 Page 9 of 35 Page ID #:16598 senior debt? A. Because of the structure. Q. And with respect to the securities themselves, the RMBS that were being sold, how did that contribute to a low likelihood of failing to repay senior debt? A. The 24 billion [price] was viewed, at least by me and AIG, as a―as a depressed value due to the market conditions at that time. And that if you looked to different, you know, I’ll call it, conditions of how the cash flows would perform, not how the market, you know, was, you know, marking these securities to market at the time, there would be adequate cash to pay off the debt . . . and then be able to share any upside potential in the residual cash flows . . . . A. I think later in the document we show various scenarios that, you know, the Fed would still make money on this transaction.” 117:12–119:3. • “Q. Do you believe that further decline had any impact on the Fed’s likelihood of full recovery? [Objection] A. Not―not from what they ultimately funded. So, I don’t recall with specificity what they exactly funded in the final, final deal. But if we were modelling the 23, 23 and a half billion, I think they funded something less, so they put less principal at risk. And ultimately, AIG and its subsidiaries sort of bore the difference in value. Q. And the reason, again, that this further decline would not affect the likelihood of full recovery is what? [Objection] A. My belief was that the ultimate, you know, cash flows were still sufficient to pay off the Feds, you know, primary investment.” 125:19–126:16. • “Q. Did you believe at the time you were negotiating the ML II transaction, that the Fed was going to make money on the transaction? A. I did. Q. Do you know if the Fed, in fact, did make money? A. I’ve read press reports that they did make money. Q. Do you know about how much? A. About $2 billion.” 126:17–127:3. Swift testified that ML II was beneficial to many different groups. • “Q. Was the Maiden Lane II transaction viewed as beneficial to AIG? A. I would view it as, yes, beneficial to a lot of different constituencies. I would view it as beneficial to AIG and its shareholders; I would view it be beneficial to policyholders of the Life Company that had, you know, significant credit exposure. I viewed it as positive to the regulators that had more security. I viewed it as a good for the American taxpayers, because a lot of this money then went to others that were able to use it for their liquidity purposes and not have a continued meltdown on the financial system. So, it was beneficial to a lot of different groups, and primarily AIG.” 72:10–73:3. EXHIBIT 1 8
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Excerpts from the depositions - Wall Street Journal

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