NY Fed's Dudley: No Ability To Manage AIG Day-To-Day
March 24 2009 - 10:45AM
Dow Jones News
The Federal Reserve Bank of New York doesn't have the ability to
control American International Group Inc. (AIG) on a day-to-day
basis and must instead exert its influence over the company in its
role as creditor, the bank's president said Tuesday.
New York Fed President William Dudley said the bank's position
as a lender does allow it to take steps to ensure repayment of its
loans to the insurer, but that "these creditor's rights do not
create an ability to manage AIG."
"It was clear from the beginning that the New York Fed - which
had never been engaged in any regulatory oversight of the company -
was not in a position to exert day-to-day management control over
the company," Dudley said in prepared remarks for a hearing before
a U.S. House committee.
The question of who runs AIG has been thrown into stark relief
in recent weeks after the company - which has been propped up with
roughly $170 billion in government funds - paid out $165 million in
controversial retention bonuses. Dudley said the New York Fed "did
not see reason to disagree" with the decision made by AIG's current
management to pay out the bonuses because of legally binding
contracts, but said the bonuses were "extremely distasteful."
Despite the hiccups that have occurred, including the government
having to frequently rework its aid to AIG, Dudley said he expects
the government to eventually be repaid for its aid.
"Although it will take time, we still expect that the proceeds
from asset sales should enable AIG to repay the New York Fed in
full," Dudley said.
-By Michael R. Crittenden, Dow Jones Newswires; 202-862-9273;
michael.crittenden@dowjones.com