American International Group (AIG) has been regulated on a consolidated basis by the New York Federal Reserve Board (NYFRB) since September of 2012.
Two separate agency sources confirmed the change of status, apparently triggered by an initial public offering of AIG stock by the Treasury Department in August that reduced the Treasury holding of AIG stock to 15.9 percent.
AIG is being regulated by the Fed because it operates a small thrift in Wilton, Conn. The thrift was formerly regulated by the Office of Thrift Supervision (OTS). But, the OTS was phased out and its authority to charter thrifts and become the consolidated federal regulator of non-banks which operate thrifts was shifted under the Dodd-Frank financial services reform law. Under the law, the Office of the Comptroller of the Currency charters thrifts and the Fed is the consolidated federal regulator of non-banks which operate thrifts.
The change was made because AIG’s financial problems was blamed on the OTS as the consolidated federal regulator.
An AIG spokesman did not respond to requests for comment on the new oversight.
At the same time, Paul Newsome, a managing director of Sandler O’Neill in Chicago, called today’s sale of the Treasury’s remaining holdings a “milestone.”
He said it represents “the last of the U.S. government’s direct ownership of AIG common stock and eliminates the overhang of future large common share offerings.”
Newsome said that in the last 19 months, the Treasury has held six offerings of AIG common shares and sold 1.66 billion shares at an average price of $31.18 per share.