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Member, Beacon International Group, Ltd.
WASHINGTON—The federal government's handling of financial assistance to American International Group Inc. provides lessons for dealing with similar situations should they arise in the future, according to a report issued Monday by the Government Accountability Office.
The report, “Review of the Federal Reserve System Financial Assistance to American International Group Inc.,” said that “time pressure was an important factor” in the Federal Reserve System's decision-making regarding aid to AIG as the insurer appeared in danger of failing in September 2008.
After discussing the federal actions, the GAO said that easing time pressure “could aid future government decision-making and the process of seeking private financing.” In particular, the GAO said the government could have begun the process of seeking private financing earlier and could have compiled information for would-be investors as soon as warning signs emerged.
“Potential private-sector financiers told us the process would have benefited from both more time and information,” the GAO said in the report.
The GAO also said that identifying and monitoring issues associated with collateral “may offer opportunities for enhancing regulators' surveillance or developing warning signs that firms are coming under stress.” The report also said that more sophisticated monitoring of financial companies' liquidity positions could be of value.
AIG's near-collapse in September 2008 led the federal government to provide it with financial assistance, which resulted in the government becoming the insurer's majority owner.