1

Views of Financial Stability Oversight Council Members 

Regarding Rescission of Determination Regarding 

American International Group, Inc. (AIG)

Note: Redactions of confidential information submitted to the Council by AIG or its regulators 

are indicated by “[•]”
2

View of Keith A. Noreika, Acting Comptroller of the Currency

I voted to rescind the Financial Stability Oversight Council’s (FSOC) designation of American 

International Group, Inc. (AIG) as a nonbank systemically important financial institution (SIFI), 

joining the two-thirds majority decision.

The FSOC can play a critical role in identifying and communicating systemic risk to our 

financial system and in coordinating agencies’ responses to these risks. The value of FSOC also 

continues to increase as a forum for discussing and analyzing emerging risk to the financial 

system. Separately, however, I feel it necessary to highlight my concerns with the FSOC’s 

authority and ability to designate individual nonbank companies for bank-like regulation. I am 

concerned that by picking institutions from among similarly situated competitors within the same 

industry and labelling one systemically important and not the other, we may adversely affect the 

competitive environment in unfair and arbitrary ways. This effect often serves the most 

politically powerful and well-connected firms.

Banks are regulated differently than every other type of business in a free market economy 

because of the potential for runnable liabilities—that is, demand deposits. Banking regulation is 

prescriptive, intrusive, constraining, and expensive for regulated banking entities—and society at 

large—but generally felt necessary in a free economy to prevent systemic run risk that could 

transfer itself through the payment system and allow weakness at one institution to affect the 

financial system and U.S. economy as a whole.

Nonbank financial companies, including insurance companies, that do not issue demand deposits 

generally are not subject to bank-like regulation that would subject the company to the same 

scrutiny of its capital and liquidity requirements and commercial limitations because the heavy 

costs of such regulation are not outweighed by the risks of a systemic event thought to be 

prevented by such regulation.

The FSOC designation process was intended to fill a perceived gap by putting financial 

regulators in charge of looking at nonbank financial companies to determine if they present 

systemic risk to our financial system in a similar way that some banks do, and, if they do, to 

regulate them like banks through supervision by the Board of Governors of the Federal Reserve 

System.

This attempt to limit risks to the financial system and the U.S. economy has several fatal 

limitations.

First, the process has become politicized and invariably forces the Council to pick “winners and 

losers” from among firms in a competitive industry. Such a politicized process risks becoming 

an exercise in rent-seeking that stunts economic growth and redistributes wealth to the politically 

powerful and well-connected.

Second, because regulators’ expertise does not convey omniscience, the Council’s designation 

decisions, by necessity, focus on history rather than the present and future state of the company 

and its potential effect on our nation’s financial system. Aside from the name, there is little 
3

similarity between AIG today and the AIG of 2007. AIG has taken a number of steps to reduce 

the potential effects on other firms and markets if the company should experience significant 

distress. AIG has divested and wound down certain business lines, and its market share in 

certain key markets has decreased. In addition, the capital markets’ exposures to AIG have 

decreased substantially since 2013, and exposures arising from the company’s insurance 

products do not appear to contribute significantly to any adverse systemic impact. These actions 

have substantially reduced the risk of a threat to the financial stability of the United States by 

material financial distress at AIG. Still, those who dissent from the majority decision today 

would brand the company with a scarlet letter by designating it a SIFI because of its history.

Finally, the designation process lacks transparency, and its decision-making criteria are weak. In 

my view, these flaws make the process arbitrary and capricious. Too much discretion can, and 

often does, lead to outcomes that are economically sub-optimal and politically motivated as is 

demonstrated in this case by the months the Council spent debating the insatiable process 

concerns of the dissenting members who sought to scuttle today’s de-designation of an 

institution that has long ceased posing any meaningful systemic threat to our financial system.

I applaud the step the Council is taking to act in a manner more consonant with the rule of law 

and the government’s participation in a free society. I believe this Council has a valuable role to 

play in facilitating interagency identification and discussion of emerging and systemic risks, 

which will enhance the work of the member agencies as they regulate and supervise the entities 

within their remit. But, the idea of picking out companies among a competitive industry for 

increased scrutiny does not work, and it remains to be seen whether it may even have perverse 

effects on the market over time, including perpetuating the perception of a designated firm being 

too big to fail. It is good we are getting out of that line of business starting today.
4

View of Richard Cordray, Director of the Bureau of Consumer Financial Protection

On September 29, 2017, the Financial Stability Oversight Council considered the issue of 

whether to rescind its prior determination to designate American International Group, Inc., 

widely known as AIG, as a systemically important financial institution. The original designation 

occurred on July 8, 2013, and the vote of the Council was unanimous. Under the Dodd-Frank 

Act, the significance of a designation is that it marked AIG for enhanced regulatory oversight by 

the Federal Reserve Board of Governors through direct supervision according to enhanced 

prudential standards. This represents one aspect of the crucial reforms that Congress very 

sensibly enacted in the wake of the financial crisis, in particular that a coordinated regulatory 

body was necessary to monitor and address risks to the financial system from the so-called 

“shadow banking” sector.

I was on the Council at the time that it designated AIG in 2013. In the analysis presented to the 

Council this year on the issue of rescinding that designation, I see nothing that changes my 

views. The meltdown of AIG – which showed itself in 2008 to be a complex and essentially 

unresolvable financial institution in need of a Federal bailout worth approximately $180 billion –

was a defining moment of the financial crisis. AIG did become smaller as a result of those tragic 

events, not because it did so on a planned or conscious basis, but simply because its business 

model blew up and, along with it, froze major chunks of the credit system and greatly damaged 

the American economy. It thus poses a very different situation from GE Capital, which the 

FSOC de-designated in 2016 after a deliberate and extensive process of shrinking and de-risking 

its financial operations. By 2013, when the Council designated AIG as a SIFI, it was smaller but 

still a highly complex international institution with substantial and interrelated exposures in 

financial channels. The Council’s decision seemed straightforward at that time.

I have reviewed the separate statements of the Director of the Federal Housing Finance Agency 

and the Chairman of the Federal Deposit Insurance Corporation about the decision by the FSOC 

to rescind its prior designation of AIG. I see no need to belabor the points they have made. I 

concur with the FDIC Chair’s statement as to why the first standard for designation continues to 

apply and agree that material financial distress at AIG not only could pose, but actually does 

continue to pose, a threat to the financial stability of the United States. In addition, I also concur 

with the FHFA Director’s statement for why the second standard is met (and though this 

standard was not explicitly addressed in the Council’s statement about the original 2013 

designation, I and perhaps other of my colleagues held the same view at the time that decision 

was made). I thus agree that the nature, scope, scale, concentration, interconnectedness, or mix 

of activities at AIG could pose a threat to the financial stability of the United States. I also 

concur in the points made in the FHFA Director’s statement as to the procedural issues that 

surrounded the Council’s vote last week on de-designation, which occurred with the support of 

only six of the ten FSOC members, one of whom recused himself from the vote.
5

View of Martin J. Gruenberg, Chairman of the Federal Deposit Insurance Corporation

The Financial Stability Oversight Council (FSOC) determined in 2013 that material financial 

distress at AIG could pose a threat to the financial stability of the United States under Section 

113 of the Dodd-Frank Act, thereby subjecting AIG to supervision by the Federal Reserve Board 

and enhanced prudential standards.

The FSOC is required by the Dodd-Frank Act annually to review its determination in regard to 

AIG. In its reevaluation process, the FSOC considers whether there have been material changes 

with respect to AIG or the markets in which it operates since the FSOC’s last reevaluation. 

The FSOC reviewed the 2013 determination in 2014 and 2015 and concluded that there had not 

been sufficient material changes with respect to AIG and the markets in which it operates to 

rescind the determination. The FSOC has now undertaken the next review and reached a 

different conclusion. I respectfully dissent from that conclusion for the following reasons. 

First, a core basis for the original determination in 2013 was that AIG had a large volume of 

liabilities subject to discretionary withdrawal – in other words, runnable. If the firm were in 

material financial distress, a large number of those liabilities could run within a short period of 

time, and the resulting asset liquidation to try to meet those obligations, occurring at a time of 

stress in financial markets, could pose a threat to U.S. financial stability. As concluded in the 

original determination, this asset liquidation could have disruptive effects on the broader 

financial markets and impair financial market functioning. That conclusion was unchanged 

following two subsequent reevaluations. 

These issues remain the same today as they were in 2013. While there have been some 

reductions in certain exposures, there have been increases in others, most notably in the life 

insurance and annuity business. Nothing about the liquidity characteristics of AIG’s liabilities 

and assets has changed to diminish the concerns originally raised by the FSOC.

In addition, several of the key assumptions used in the recent analysis to support a different 

determination for AIG deviate significantly from the approach taken by the FSOC in the original 

2013 determination and the 2014 and 2015 annual reevaluations. Today’s decision largely relies 

upon the experience of much smaller insurance company failures in moderate stress 

environments years ago to assess the potential impact of a failure of a company as large, 

interconnected, and internationally active as AIG today in a severe stress environment. 

Consequently, those limited experiences offer little useful guidance for run risk and liquidity risk 

assumptions for a firm of AIG’s size and complexity.

Finally, neither AIG’s overall reduction in size since 2013, nor its divestiture of non-material 

operations, including those in foreign jurisdictions, have affected in any substantial manner the 

resolution obstacles previously identified by the FSOC. The asset size of the firm has only 

declined marginally since 2013, and the percentage of its foreign revenue and foreign assets to 

that of the entire firm is roughly the same. 
6

AIG remains a large, complex, highly interconnected global organization operating in multiple 

states and foreign jurisdictions with numerous internal interdependencies presenting significant 

challenges to its orderly resolution in the event of its material financial distress or failure. 

In light of these considerations, I respectfully dissent. 
7

View of J. Christopher Giancarlo, Chairman of the Commodities Futures Trading Commission

As representative of the US Commodity Futures Trading Commission (“CFTC”) to the Financial 

Stability Oversight Council (“FSOC”), I have approached the question of the de-designation of 

AIG as a Systemically Important Financial Institution (“SIFI”) from the perspective of 

derivatives market regulation—the CFTC’s statutory jurisdiction and area of expertise.

Drawing upon recent swaps market data available to the CFTC and the Council’s written 

analysis for this reevaluation,1 I have sought to answer two fundamental questions:

1. How is today’s AIG comparable to the company that was designated as a SIFI in 2013?

2. Had FSOC not designated AIG in 2013, would AIG meet the SIFI criteria today?

I start with the first question: How does AIG in 2017 compare to AIG in 2012, upon which the 

Council made its designation?

Since designation, AIG has significantly de-risked itself as derivatives counterparty. Its net 

derivatives liabilities have decreased by 50 percent from $4 billion to $2 billion. (Putting that $2 

billion in context, AIG’s net derivatives liability in 2007 was $18 billion.) 

Moreover, AIG’s securities lending liabilities have shrunk from: $82 billion in 2007 to $8.2 

billion in 2012, and to $2.4 billion in 2016. 

AIG’s capital markets downsizing results from its winding down of AIG Financial Products. 

Before the financial crisis, that unit generated one-sixth of AIG’s operating income by 

underwriting financial market risk—something with which AIG had little experience and would 

prove to be woefully incompetent.2

Today, AIG Financial Products is immaterial to AIG’s overall assets, liabilities, and revenue.

Moreover, AIG no longer acts as a swaps dealer. It uses derivatives only in the course of its 

regulated insurance operations—the same way as do other insurance end-users to manage 

variable interest rates, foreign exchange rates, and equity portfolios.3

Also, unlike 2012 or years prior, most US swaps products now trade in US markets that feature 

central clearing, standardized margins, regulated execution and trade reporting under the DoddFrank Act. 

 1 Some of which data is not publically available.

2 AIG Financial Products’ capital markets activities generated $2.66 billion in operating income 2005 while the 

company as a whole reported $15.2 billion in operating income. See AIG 2006 Annual Report. 3 See FSOC, Annual Reevaluation of the Council’s Final Determination regarding American International Group, 

Inc. (AIG) under Section 113 of the Dodd-Frank Wall Street Reform and Consumer Protection Act (Dodd-Frank 

Act) (2016), p. 18-20.
8

As a result, AIG’s remaining swaps trading activity takes place today in a regulatory 

environment that is markedly more robust than it was in 2012. 

These changes have caused market participants to dramatically reduce credit default swap 

protection on AIG. The outstanding notional amount of single-name CDS with AIG as the 

reference entity has dropped from: $70 billion in 2012 to $9.4 billion in 2016 - a reduction of 87 

percent. The dollar amount of that outstanding CDS protection has declined during that period 

from: $38 billion to $9 billion - a reduction of 75 percent. 

This substantial reduction shows that AIG’s debt-holders, derivatives counterparties, and market 

participants view the firm as a far less significant credit risk than it was at the time of 

designation.

Turning to the second question: Would AIG meet the criteria to be a SIFI today?

Section 113 of Dodd-Frank authorizes the FSOC to designate a firm if material distress at the 

company, or the nature, scope, size, scale, concentration, interconnectedness, or mix of the firm’s 

activities poses a threat to financial stability. 

Based on current data, AIG does not meet this threshold. AIG does not have systemically 

important ties to other large financial institutions: no GSIB has any combination of debt, credit 

lines, repo/securities lending, or net derivatives liabilities to AIG of more than [•] of their equity 

capital. In fact, [•] of equity capital exposed to AIG.4

AIG’s assets standing behind its liabilities to its retail policyholders are ring-fenced at the 

subsidiary under state-based insurance regulation. 

So, in conclusion, based on available data and in concurrence with the views expressed by 

Treasury Secretary Steven T. Mnuchin, Federal Reserve Chair Janet L. Yellen, National Credit 

Union Chairman J. Mark McWatters, Acting Comptroller Keith Noreika, Independent Member 

Roy Woodall, and the Council staff in its recommendation memo, I find:

1. That AIG today is not a comparable systemic risk to the financial system as the firm that 

was designated in 2013.

2. If AIG were considered for designation today, it would not meet FSOC’s own criteria to 

be a SIFI.

Accordingly, I support de-designation of AIG as a SIFI.

 4 See FSOC, Annual Reevaluation of the Council’s Final Determination regarding American International Group, 

Inc. (AIG) under Section 113 of the Dodd-Frank Wall Street Reform and Consumer Protection Act (Dodd-Frank 

Act) (2016), p. 23.
9

View of Melvin L. Watt, Director of the Federal Housing Finance Agency

For the reasons set forth below, I dissent from the majority's decision to rescind the Council's

prior determination to designate AIG for supervision by the Federal Reserve Board of Governors

and subject it to prudential standards.

Under Section 113 of the Dodd-Frank Act, the Council may determine that a nonbank financial

company will be supervised by the Federal Reserve Board of Governors and be subject to

prudential standards if it determines that:

1. Material financial distress at the nonbank financial company could pose a threat to the

financial stability of the United States; or

2. The nature, scope, size, scale, concentration, interconnectedness, or mix of activities of

the nonbank financial company could pose a threat to the financial stability of the United

States.

The Council may subject a nonbank financial company to Board of Governors supervision and 

prudential standards if either of these two standards is met.

In the Council's initial evaluation of AIG in 2013, and in subsequent annual reevaluations, FSOC 

did not evaluate AIG on the second standard, independent of the first.5 Instead, it incorporated 

an evaluation of the factors required to be considered under the second standard (nature, scope, 

size, etc.) into its evaluation under the first standard. These factors were appropriately 

considered as they are among the ten criteria statutorily required to be considered in designating

AIG under the first standard. However, if the Council concludes that AIG no longer meets the 

criteria for designation under the first standard, in my view an independent review and 

determination under the second standard is now required before a decision can be appropriately 

made to rescind the designation.

In light of the above, I respectfully dissent from the decision to rescind AIG's designation 

because 1) no independent review and determination has been made by the Council under the 

second legal standard set out in Section 113 of Dodd-Frank, and 2) the Council's consideration of 

the second standard's criteria as factors under the first legal standard is not sufficiently robust to 

substitute as the required independent review and determination under the second standard.

A number of my concerns about the sufficiency of the Council's analysis of the criteria required 

to be considered under the second legal standard, and whether that analysis is defensible as an 

independent basis for rescission of AIG's designation, reflect themselves in specific language and 

shortcomings identified in the Council's decision. Several excerpts from the decision are

illustrative. 

 5 The Council's initial determination explicitly stated as follows: "While the Council considered AIG's activities in 

evaluating AIG under the First Determination Standard, the Council did not consider whether the nature, scope, size, 

scale, concentration, interconnectedness, or mix of AIG's activities, absent material financial distress at AIG, could 

pose a threat to U.S. financial stability." Neither has an independent evaluation under the second standard been 

made in subsequent years.
10

The Council's decision states on page 68:

The [2013] Council Basis concluded that the complexity and interconnectedness of AIG, 

including its domestic and global operations, could increase the obstacles to the 

company's resolution. Although AIG now operates in fewer jurisdictions and there 

would be fewer regimes involved in a resolution should one be necessary, it continues to 

operate in over 80 countries and jurisdictions, in all 50 states, the District of Columbia, 

and the five U.S. territories. AIG's diverse business activities continue to fall under the 

authority of numerous state, federal, and non-U.S. regulators. As noted in the Council 

Basis, an insolvent parent would be resolved under the U.S. Bankruptcy Code, while the 

U.S. insurance companies would be resolved in state courts in the state of domicile; 

AIG's entities are domiciled in six states and Puerto Rico. Each state where AIG 

provides insurance operates a life insurance guaranty fund and at least one property and 

casualty guaranty fund to pay the outstanding claims of the insolvent insurer's 

policyholders. In addition, AIG's subsidiaries include broker-dealers and investment 

advisors that are regulated by the SEC. If necessary, AIG's broker-dealers and AIG 

Federal Savings Bank would be resolved under the Securities Investment Protection Act 

and the Federal Deposit Insurance Act, respectively. Further, 31 percent of AIG's 

operating revenues are derived from non-U.S. countries and are subject to unique 

bankruptcy regimes.

Cross-border efforts have begun that could help facilitate cooperation and coordination to 

address the complexity of AIG (such as a crisis management group with members from Japan, 

Singapore, and the United States and the insurance cross-border crisis management group set up 

by the Financial Stability Board). However, as the Council's decision confirms on page 69:

Despite these efforts, there is no global regulatory framework for the resolution of crossborder financial groups. Any resolution of AIG would continue to require 

accommodations with local supervisory authorities and cooperation among a number of 

home and host jurisdiction supervisory authorities and courts. Adverse effects resulting 

from any one country may affect AIG's liquidity and financial condition in another 

country. Ring-fencing or seizure could follow from an AIG failure. Some countries' 

legal requirements govern the constitution of technical reserves and may hinder 

repatriation of profits and assets. While AIG has reduced the number of non-U.S. 

jurisdictions it operates in, the lack of a global framework for resolution may represent an 

obstacle to AIG's rapid and orderly resolution.

The fact that efforts to address these concerns are still in flight confirms to me that rescinding the 

designation of AIG without further independent evaluation under the second legal standard is 

premature and unwise. 

The Council's decision also confirms that AIG itself may be taking steps to reduce its level of 

complexity and make resolution easier if resolution became necessary. As stated on page 68: 
11

In 2016, AIG established a new Swiss holding company, AIG International Holdings, 

GmbH, which is intended to be the ultimate holding company for all of AIG's non-U.S. 

entities. AIG is in the process of transferring its non-U.S. subsidiaries to this new entity 

and anticipates that this restructuring, once implemented, would simplify AIG's 

organizational structure and facilitate the optimization of its international capital strategy. 

Again, however, this restructuring is still in flight and, as acknowledged in the Council's 

decision, "the impact of this restructuring cannot be assessed until it is completed."

The Council's decision on page 68 further confirms the following:

In the event of AIG's material financial distress, legal entities critical to the continuation 

of operations could lose access to internal sources of funding, thereby leading to the loss 

of liquidity and possibly either insolvency or seizure by a regulator. Capital maintenance 

agreements, inter-affiliate guarantees, intercompany reinsurance arrangements, and 

pooling mechanisms could still transmit stress to the holding company and among AIG 

affiliates in resolution.

While I do not take issue with the determination being made by the Council under the first 

standard set out in Section 113 of Dodd-Frank, the above findings, each of which is explicitly 

stated in the Council's decision, reaffirm my view that rescission of the designation of AIG is 

premature and unwise without making the legal assessment required under Section 113's second 

standard. Congress obviously intended for the second standard to be regarded as on equal legal 

footing with the first standard and understood that it would be possible for a company to be "too 

big to fail" even if it passed the test set out in the first standard and was not experiencing 

financial distress. The Council has also explicitly acknowledged this in its Regulations 

promulgated at 12 CPR Part 1310 and in its Guidance issued as Appendix A thereto. By failing 

to make an independent evaluation under the second legal standard, in my view the Council has 

failed to appropriately apply the law and, as well, has failed to follow its own Regulations. 

I also object to the rescission on the basis that it did not receive the affirmative vote of two-thirds 

of the Council's voting members. By statute, the Council consists of ten voting members. For 

this determination on rescission, one of the ten voting members was recused because of a conflict 

of interest. In my view, by statute, seven of the ten voting members were required to vote in the 

affirmative to rescind the designation of AIG.6

 Instead, the Chairperson of the Council made a 

unilateral determination that the affirmative vote of only six of nine voting members was

required to rescind and subjected his ruling to a vote that required only a majority to affirm. In 

my view, the Council's decision represents a simple majority decision, not the two-thirds 

required by statute. In addition to the above substantive dissent from this majority decision, I 

also object to rescission on this legal basis.

 6 Votes to rescind, by statute and by FSOC Regulations "require the vote of not fewer than two-thirds of the voting 

members of the Council then serving, including the affirmative vote of the Chairperson of the Council." See Section 

l 13(a) of Dodd-Frank and 12 C.F.R. § 1310.10(b)(2).
12

View of J. Mark McWatters, Chairman of the National Credit Union Administration

I concur with the decision to rescind the designation of AIG as a Systemically Important 

Financial Institution, or SIFI.

My analysis of AIG began in 2009 when I served as a member of the TARP Congressional 

Oversight Panel. The TARP Panel was charged by Congress to report every 30 days on the 

implementation of the TARP program by the Department of Treasury. Our investigation of AIG 

yielded a 300-plus page report in which we concluded that AIG was mismanaged and engaged in 

inappropriately risky financial transactions. We concluded that AIG failed to prudently 

underwrite and appropriately price its substantial portfolio of credit default swaps and other 

derivative products. Payments due to the swap counter-parties were sufficient to guarantee that, 

if the company did not receive help, AIG would fail. That failure would have led to catastrophic 

consequences for the U.S. and world economies.

In reality, those consequences were mitigated by the $183 billion bailout of the company funded 

by American taxpayers. In essence, Main Street bailed out Wall Street to help keep the entire 

U.S. economy afloat. Put bluntly: AIG was a basket case in late 2008, the proverbial poster child 

for ill-conceived business plans, internal control systems, and risk-management protocols.

In contrast, AIG is a different company today. As a commercial finance, M&A, and tax attorney 

with a CPA license, I have thoughtfully analyzed the financial statements and other public and 

non-public information submitted to Council members and staff. I have also reviewed the 

detailed analysis of AIG prepared by the Nonbanks Designation Committee and reviewed by the 

FSOC Deputies. I have also had an opportunity to reflect on the comments of my fellow Council 

members, and have paid particular attention to those who do not concur with the dedesignation 

of AIG.

Although I certainly appreciate that reasonable minds may differ, after consideration, I believe 

that AIG no longer presents a systemic risk to the U.S. economy. I note that AIG remains a 

complex international insurance company with an embedded financial institutions component, 

and so, AIG is certainly not free of risk. In my judgment, however, the additional regulatory 

burden of a continuing SIFI designation is neither necessary nor appropriate for AIG. Instead, 

we should acknowledge that the Council’s original decision with respect to AIG has had its 

intended effect, and that AIG’s traditional regulators may now supervise and oversee the safety 

and soundness risks presented by the company, without continued heightened concern that the 

company presents an undue risk to U.S. financial stability.

In reaching this conclusion, I note that AIG no longer holds an extensive portfolio of the 

derivative products that spawned the 2008 financial crisis and ensuing taxpayer bailout—the 

circumstances and events that were still fresh in the minds of regulators as the original SIFI 

designation analysis was being done. Today, AIG has a decidedly smaller financial footprint in 

the capital markets than it did at the time of designation. In turn, capital market participants are 

now less exposed to AIG. The company has reduced its total debt, short-term debt, derivatives 

transactions, securities lending volume and activity in the repurchase markets. In addition, AIG 
13

has moved to simplify its corporate structure and reduce its financial market footprint by selling 

significant interests in the aircraft leasing and private mortgage insurance markets.

As some Council members have properly noted, and the basis document notes, AIG continues to 

hold significant exposure to annuity products. And some Council members have raised concerns 

that, if AIG were to experience material financial distress, policyholders would withdraw their 

funds quickly, resulting in a cascade of asset sales that would be destabilizing to the U.S. 

financial system.

The “fire sale” concerns with respect to AIG were appropriate for the time when they were first 

raised. However, FSOC has continued to dig more deeply and refine its previous analyses. The 

document developed by the staff takes a more nuanced—and likely more correct—view of the 

potential for fire sales and their likely effect on the markets in which AIG is currently operating. 

The analysis presented leads me to believe that risk from this possibility is substantially smaller 

than previously thought. Again, while I understand that reasonable minds may differ on this, I 

am not aware of any compelling evidence that AIG's internal control systems and riskmanagement protocols, as overseen by its traditional regulators, cannot manage the risks in these 

entirely traditional insurance products. As a result, I believe the risks to U.S. financial stability 

from this possibility are very remote.

I must also note that, since the original designation, there have also been developments in state 

and industry regulation that work to more clearly identify enterprise risk at AIG. This would 

appear to be a necessary step in further developing management and mitigation strategies that 

ultimately strengthen the company’s resiliency.

I remain confident that AIG, if presented to this Council as, say, Company X, would not receive 

a SIFI designation today. We should not unduly burden AIG with the legacy of prior acts of 

mismanagement, ill-conceived business models, and profound negligence in assessing risk. 

Instead, I believe it is more appropriate to analyze AIG based upon the facts and circumstances 

presented today and reasonably anticipated in the future. From that perspective, and armed with 

the significant and detailed analysis of the staff, I believe it is in the public policy interest to 

rescind AIG’s designation as a systemically important financial institution.

Separately, acting on the independent advice of my own counsel, I approved of the Council’s 

determination that, under the Dodd-Frank Act, a Council member who is disqualified from 

participating in a particular matter—and therefore cannot participate in that matter—is not “then 

serving” on the Council with respect to that matter.
14

View of S. Roy Woodall, Jr., the Independent Member Having Insurance Expertise

As the Council’s Independent Member having insurance expertise, I concur with the Council’s 

determination that the 2013 Final Designation of the American International Group, Inc. (AIG) 

under Section 1137 of the Dodd-Frank Wall Street Reform and Consumer Protection Act (DoddFrank Act) should be rescinded.

Section 113(a)(1) of the Dodd-Frank Act grants authority to the Council to “determine” if a 

nonbank financial company “could pose a threat to the financial stability of the United States” 

either because of (1) “material financial distress”, or (2) “the nature, scope, size, scale, 

concentration, interconnectedness, or mix of... activities.”8

Thus, these are the two standards which the Council may use to determine that an insurance 

company or any other nonbank financial institution should be designated as what is commonly 

referred to as a SIFI (Systemically Important Financial Institution) and be subject to prudential 

standards established by the Board of Governors of the Federal Reserve System.

The SIFI designation of AIG in 2013 was based upon the first determination standard: material 

financial distress that could make it a threat to financial stability, rather than on its activities

alone.

It is well known that during the financial crisis AIG actually did experience material financial 

distress, played a causative role in the crisis, and received a Federal bailout. These realities 

unofficially buttressed the determination basis made by the Council and its resulting decision to 

designate AIG as a SIFI.

I believe that today’s AIG is a different organization, approximately half the size it was at the 

time of the financial crisis and, therefore, no longer satisfies the first determination standard 

under which it was designated. I thus concur with those Council members who have voted to 

rescind AIG’s SIFI determination pursuant to Sec. 113(d)(2)9 of the Dodd-Frank Act.

However, I find both the Council’s rescission document and the Council’s Rule and Interpretive 

Guidance that annual reevaluations should focus on material changes since the previous review10

to be somewhat confusing and possibly even inconsistent with the statutory test: to determine 

whether the company could pose a threat to the financial stability of the U.S. I do not believe 

today’s AIG could pose such a threat.

I continue, however, to be concerned regarding some of AIG’s activities that are discussed in the 

Council’s rescission document, especially those relating to annuities with guaranteed features, as 

well as [•], especially in view of its overall regulatory scrutiny once it no longer is considered by 

the Council to be a SIFI. Although I do not personally believe these activities would justify 

 7 12 U.S.C. § 5323 8 12 U.S.C. § 5323(a) 9 12 U.S.C. § 5323 10 12 C.F.R. part 1310
15

continuing to regulate AIG as a SIFI at this time (i.e., they do not satisfy the second statutory 

designation standard), I do believe they should continue to be monitored from a macro-prudential 

perspective.

Section 2(12)(D) of the Dodd-Frank Act11 clearly states that State insurance regulators are 

recognized as the primary financial regulators “with respect to the insurance activities and 

activities that are incidental to such insurance activities of an insurance company that is subject 

to supervision by the State insurance authority under State insurance law.”

As pointed out in the Council’s rescission document, State regulators have indeed enhanced their 

regulatory capabilities since the financial crisis and since the Council’s 2013 designation of AIG. 

These improvements include steps such as the Solvency Modernization Initiative of the National 

Association of Insurance Commissioners (NAIC), the evolution of supervisory colleges, and the 

introduction of new regulatory reporting requirements such as the Enterprise Risk Report and the 

Own Risk and Solvency Assessment.

However, in my opinion, the most promising regulatory development with a financial stability 

impact is the NAIC’s recently announced Macro-Prudential Project, which is being designed to 

enhance the regulation of insurer liquidity risk by monitoring the liquidity characteristics of 

insurers’ liabilities, conducting liquidity stress testing, and evaluating liquidity risk management 

processes.

In my view, it is incumbent upon the Council to closely monitor these State regulatory 

developments pursuant to Section 112(a)(2)(D) of Dodd-Frank,12 especially those related to 

liquidity risk. The Council should also consider using its considerable authority under Section 

12013 of the Dodd-Frank Act to make recommendations to State insurance regulators as to 

possible heightened standards, as it did in the case with asset managers, in order to regulate 

systemic risk of insurers on a consolidated basis more effectively. Such recommendations 

should be the result of a continuing dialogue between State insurance regulators and the 

members of the Council.

 11 12 U.S.C. § 5301 12 12 U.S.C. § 5322 13 12 U.S.C. § 5330