AIG For Now Remains Under Federal Oversight -- Update
September 22 2017 - 5:59PM
Dow Jones News
By Ryan Tracy and Leslie Scism
American International Group Inc. will remain under federal
supervision for now after U.S. officials discussed the firm's
future at a private meeting Friday, according to people familiar
with the matter and a Treasury Department statement.
Discussions among regulators are expected to continue about the
company, which was designated a systemically important financial
institution in 2013. The SIFI label was created after the financial
crisis that comes with stricter federal oversight.
Regulators review the designation for companies tagged with it
every year. This year they have been considering whether to remove
it for AIG, according to people familiar with the matter.
AIG declined to comment.
A Treasury Department statement said the Financial Stability
Oversight Council of senior regulators discussed the designation of
a financial firm, but didn't disclose a vote. The firm under
discussion was AIG, people familiar with the matter said.
The AIG issue has become a battleground between President Donald
Trump's appointees and holdovers from the Obama administration.
Treasury Secretary Steven Mnuchin, a Trump appointee, chairs the
council. He is one of only five Trump appointees among the group's
10 voting members. The rest were chosen by President Barack Obama
and are still serving out their terms.
Rescinding AIG's SIFI designation would typically require a
two-thirds vote of the council, or seven out of 10 votes. It isn't
clear whether any Obama appointees are willing to join Trump
appointees to rescind the SIFI tag. None commented on the matter
when contacted Friday.
Analysts have said Roy Woodall, the council member with
insurance expertise, may be sympathetic to AIG's argument that it
has reshaped itself since the financial crisis. Federal Reserve
Chairwoman Janet Yellen also "seemed open to the possibility" in a
press conference Wednesday, said Ian Katz, analyst at Capital Alpha
Partners, in a client note Thursday.
Ms. Yellen on Wednesday said the designation "is not meant to be
a one-way street...firms may change their business models or just
how they conduct their business, and we should welcome
de-designation of firms."
Complicating matters, Trump and Obama appointees have been at
odds in recent weeks over the procedures surrounding the AIG vote,
according to people familiar with the matter.
Securities and Exchange Commission Chairman Jay Clayton has
recused himself from the AIG discussions due to his prior work at
the Sullivan & Cromwell law firm, which counts AIG as a
significant client. That leaves an open question: If Mr. Clayton
doesn't vote, are seven votes still required to rescind the SIFI
designation? Or would a 6-3 vote suffice? Officials have been
privately wrangling over the question, these people said.
Treasury officials at one point proposed changing the council's
bylaws with the goal of allowing another SEC official to vote in
Mr. Clayton's stead, but the matter was dropped after other council
members objected, these people said.
The statement about Friday's meeting didn't indicate whether the
council would meet again to discuss the issue.
Evercore ISI analysts said Friday they wouldn't view a
"no-decision" outcome as a negative for AIG because the Treasury is
separately reviewing the process for designating firms systemically
important and a determination about AIG "may be driven" by that
report.
Write to Ryan Tracy at ryan.tracy@wsj.com and Leslie Scism at
leslie.scism@wsj.com
(END) Dow Jones Newswires
September 22, 2017 17:44 ET (21:44 GMT)
Copyright (c) 2017 Dow Jones & Company, Inc.
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