October 24, 2017

Warren, Whitehouse Press FSOC Members for Details on Decision to Remove AIG's SIFI Designation

Senators Question Justification for Decision, Why FSOC Failed to Follow Standard Procedures During Deliberation, and Involvement of Icahn and Insurance Industry Representatives in Decision Process

Text of the letters available here (PDF)

Washington, DC - United States Senators Elizabeth Warren (D-Mass.) and Sheldon Whitehouse (D-R.I.) today called on members of the Financial Stability Oversight Council (FSOC) to provide details about their decision to remove American Insurance Group's (AIG) designation as a Systemically Important Financial Institution (SIFI), potentially risking the security of the United States financial system.

AIG received a $182 billion bailout from American taxpayers in the wake of the 2008 financial crisis, and FSOC ultimately designated AIG as a SIFI in 2013, subjecting it to increased oversight and regulation. Last month, members of the FSOC voted 6 to 3 in favor of eliminating the enhanced federal oversight of AIG, including regular stress tests, the requirement for a living will, and higher capital and liquidity restrictions. The 10th voting member of the FSOC, SEC Chairman Jay Clayton, recused himself from the vote.  

"The FSOC ignored strong evidence that AIG continues to pose a risk to U.S. financial stability, and failed to follow basic and important procedural requirements in making its decision," wrote the senators. "And information about the decision appears to have been leaked to the insurance industry and others prior to the formal vote and the public notice."

In addition, the senators again raised a number of questions about whether the FSOC's deliberations may have been inappropriately influenced by Carl Icahn, former Special Adviser to the President and current AIG shareholder. The senators previously questioned Treasury Secretary Steven Mnuchin, Chair of the FSOC, about Icahn's interactions with FSOC members - his recent response ignored those questions.  According to reports, Icahn met privately with at least one FSOC member, SEC Chairman Clayton.

"The FSOC's decision to remove AIG from the list of SIFIs reduces supervision and oversight of the insurance giant and puts taxpayers and our economy at risk less than a decade after the company's failure rocked the nation's financial system and forced taxpayers into a $182 billion bailout," the senators wrote.

The letters were sent to each of the FSOC's ten voting members:  Steven Mnuchin (Treasury), Jay Clayton (Securities and Exchange Commission), Timothy Massad (Commodity Futures Trading Commission), Janet Yellen (Federal Reserve), Keith Noreika (Comptroller of the Currency), Richard Cordray (Consumer Financial Protection Bureau), Martin Gruenberg (Federal Deposit Insurance Corporation), Mel Watt (Federal Housing Finance Agency), J. Mark McWatters (National Credit Union Administration), and S. Roy Woodall, Jr. (independent member).