American International Group plans to sell its savings and loan out of concerns around restrictions imposed by the so-called Volcker rule, not federal regulation.
In comments this afternoon on CNBC, Robert Benmosche, AIG president and CEO, also said he welcomes federal regulation “because we want someone over our shoulder,” especially after what happened in 2008, when AIG required a huge federal bailout because it insured an estimated $2.77 trillion of what turned out to be troubled mortgage securities.
If it sells its thrift, AIG will likely be federally regulated through designation by the Financial Stability Oversight Council as a systemically significant non-bank.
That is likely to be done after the election.
It would trigger the same consolidated-asset oversight the Fed plans for thrifts owned by non-banks such as insurers.
Effectively, Benmosche said, he wants the Fed to give AIG credibility in the marketplace through vigorous oversight.
To get that credibility, Benmosche said AIG would have to show the Fed a strong balance sheet so that it will allow AIG to pay a dividend to its shareholders.
He said AIG hopes to be able to pay a dividend to shareholders starting in 2013, and that it is “done for now” repurchasing its shares.
AIG bought $5 billion worth of the shares the Treasury is selling in its latest offering.
John Nadel, an analyst at Sterne Age & Leach in New York, said in an investor’s note last week that he was surprised that AIG had decided to limit share repurchase to $5 billion. He said he expected AIG to repurchase $10 billion, but that absent AIG management comment, “It seems plausible to us that regulators may have informed AIG that it shouldn’t push its capital management activities any higher.”
Benmosche also said he fully expects the federal government to sell its remaining shares in AIG “very quickly.”
Benmosche made his comments in response to a Wall Street Journal story Monday that quoted a Federal Reserve Board spokesperson as saying that as soon as the federal government’s share of AIG falls below 50 percent of the company’s stock, the Fed will oversee AIG as a thrift holding company.