Federal Financial Assistance
Preliminary Observations on Assistance Provided to AIG
Gao ID: GAO-09-490T March 18, 2009
The Board of Governors of the Federal Reserve System (Federal Reserve) and the Department of the Treasury (Treasury) have made available over $182 billion in assistance to American International Group (AIG) to prevent its failure. However, questions have been raised about the goals of the assistance and how it is being monitored. Also, because AIG is generally known for its insurance operations, questions exist about the effect of the assistance on certain insurance markets. This statement provides preliminary findings on (1) the goals and monitoring of federal assistance to AIG and challenges to AIG's repayment of the assistance; and (2) the potential effects of the federal assistance on the U.S. commercial property/casualty insurance market. GAO's work on these issues is ongoing. To date, we have reviewed relevant documents on the assistance and ongoing operations of AIG, as well as documents issued by the Federal Reserve and Treasury. We also interviewed officials from these organizations as well as industry participants (competitors, brokers, and customers) and insurance regulators, among others.
Federal financial assistance to AIG, both from the Federal Reserve and Federal Reserve Bank of New York through their authority to lend funds to critical nonbank institutions and from Treasury's Troubled Asset Relief Program (TARP), has focused on preventing systemic risk that could result from a rating downgrade or failure of AIG. The goal of the assistance and subsequent restructurings was to prevent systemic risk from the failure of AIG by allowing AIG to sell assets and restructure its operations in an orderly manner. The Federal Reserve has been monitoring AIG's operations since September, and Treasury has begun to more actively monitor AIG's operations as well. Although the ongoing federal assistance has prevented further downgrades in AIG's credit rating, AIG has had mixed success in fulfilling its other restructuring plans, such as terminating its securities lending program, selling assets, and unwinding its AIG Financial Products portfolio. For example, AIG has made efforts at selling certain business units and has begun an overall restructuring, but market and other conditions have prevented significant asset sales, and most restructuring efforts are still under way. AIG faces ongoing challenges from the continued overall economic deterioration and tight credit markets. AIG's ability to repay its obligations to the federal government has also been impaired by its deteriorating operations, inability to sell its assets and further declines in its assets. All of these issues will continue to adversely impact AIG's ability to repay its government assistance. As part of GAO's ongoing work related to the federal assistance provided to AIG, GAO is reviewing the potential impact of the assistance on the commercial property/casualty insurance market. Specifically, GAO is reviewing potential effects of the assistance on AIG's pricing practices. According to some of AIG's competitors, federal assistance to AIG has allowed AIG's commercial property/casualty insurance companies to offer coverage at prices that are inadequate for the risk involved. Conversely, state insurance regulators, insurance brokers, and insurance buyers said that while AIG may be pricing somewhat more aggressively than in the past in order to retain business in light of damage to the parent company's reputation, they did not see indications that this pricing was inadequate or out of line with previous AIG pricing practices. Moreover, some have noted that AIG has lost business because of the problems encountered by its parent company. As GAO evaluates these issues, it faces a number of challenges associated with determining the adequacy of commercial property/casualty premium rates, especially in the short term. These challenges include the unique, negotiated nature of many commercial insurance policies, the subjective assumptions involved in determining premiums, and the fact that for some lines of commercial insurance it can take several years to determine if premiums charged were adequate for the related losses.
GAO-09-490T, Federal Financial Assistance: Preliminary Observations on Assistance Provided to AIG
This is the accessible text file for GAO report number GAO-09-490T
entitled 'Federal Financial Assistance: Preliminary Observations on
Assistance Provided to AIG' which was released on March 18, 2009.
This text file was formatted by the U.S. Government Accountability
Office (GAO) to be accessible to users with visual impairments, as part
of a longer term project to improve GAO products' accessibility. Every
attempt has been made to maintain the structural and data integrity of
the original printed product. Accessibility features, such as text
descriptions of tables, consecutively numbered footnotes placed at the
end of the file, and the text of agency comment letters, are provided
but may not exactly duplicate the presentation or format of the printed
version. The portable document format (PDF) file is an exact electronic
replica of the printed version. We welcome your feedback. Please E-mail
your comments regarding the contents or accessibility features of this
document to Webmaster@gao.gov.
This is a work of the U.S. government and is not subject to copyright
protection in the United States. It may be reproduced and distributed
in its entirety without further permission from GAO. Because this work
may contain copyrighted images or other material, permission from the
copyright holder may be necessary if you wish to reproduce this
material separately.
Testimony:
Before the Subcommittee on Capital Markets, Insurance, and Government
Sponsored Enterprises, House Committee on Financial Services:
United States Government Accountability Office:
GAO:
For Release on Delivery:
Expected at 10:00 a.m. EDT:
Wednesday, March 18, 2009:
Federal Financial Assistance:
Preliminary Observations on Assistance Provided to AIG:
Statement of Orice M. Williams, Director:
Financial Markets and Community Investment:
GAO-09-490T:
GAO Highlights:
Highlights of GAO-09-490T, a testimony to Subcommittee on Capital
Markets, Insurance, and Government Sponsored Enterprises, Committee on
Financial Services, House of Representatives.
Why GAO Did This Study:
The Board of Governors of the Federal Reserve System (Federal Reserve)
and the Department of the Treasury (Treasury) have made available over
$182 billion in assistance to American International Group (AIG) to
prevent its failure. However, questions have been raised about the
goals of the assistance and how it is being monitored. Also, because
AIG is generally known for its insurance operations, questions exist
about the effect of the assistance on certain insurance markets.
This statement provides preliminary findings on (1) the goals and
monitoring of federal assistance to AIG and challenges to AIG‘s
repayment of the assistance; and (2) the potential effects of the
federal assistance on the U.S. commercial property/casualty insurance
market. GAO‘s work on these issues is ongoing. To date, we have
reviewed relevant documents on the assistance and ongoing operations of
AIG, as well as documents issued by the Federal Reserve and Treasury.
We also interviewed officials from these organizations as well as
industry participants (competitors, brokers, and customers) and
insurance regulators, among others.
What GAO Found:
Federal financial assistance to AIG, both from the Federal Reserve and
Federal Reserve Bank of New York through their authority to lend funds
to critical nonbank institutions and from Treasury‘s Troubled Asset
Relief Program (TARP), has focused on preventing systemic risk that
could result from a rating downgrade or failure of AIG. The goal of the
assistance and subsequent restructurings was to prevent systemic risk
from the failure of AIG by allowing AIG to sell assets and restructure
its operations in an orderly manner. The Federal Reserve has been
monitoring AIG‘s operations since September, and Treasury has begun to
more actively monitor AIG‘s operations as well. Although the ongoing
federal assistance has prevented further downgrades in AIG‘s credit
rating, AIG has had mixed success in fulfilling its other restructuring
plans, such as terminating its securities lending program, selling
assets, and unwinding its AIG Financial Products portfolio. For
example, AIG has made efforts at selling certain business units and has
begun an overall restructuring, but market and other conditions have
prevented significant asset sales, and most restructuring efforts are
still under way. AIG faces ongoing challenges from the continued
overall economic deterioration and tight credit markets. AIG‘s ability
to repay its obligations to the federal government has also been
impaired by its deteriorating operations, inability to sell its assets
and further declines in its assets. All of these issues will continue
to adversely impact AIG‘s ability to repay its government assistance.
As part of GAO‘s ongoing work related to the federal assistance
provided to AIG, GAO is reviewing the potential impact of the
assistance on the commercial property/casualty insurance market.
Specifically, GAO is reviewing potential effects of the assistance on
AIG‘s pricing practices. According to some of AIG‘s competitors,
federal assistance to AIG has allowed AIG‘s commercial
property/casualty insurance companies to offer coverage at prices that
are inadequate for the risk involved. Conversely, state insurance
regulators, insurance brokers, and insurance buyers said that while AIG
may be pricing somewhat more aggressively than in the past in order to
retain business in light of damage to the parent company‘s reputation,
they did not see indications that this pricing was inadequate or out of
line with previous AIG pricing practices. Moreover, some have noted
that AIG has lost business because of the problems encountered by its
parent company. As GAO evaluates these issues, it faces a number of
challenges associated with determining the adequacy of commercial
property/casualty premium rates, especially in the short term. These
challenges include the unique, negotiated nature of many commercial
insurance policies, the subjective assumptions involved in determining
premiums, and the fact that for some lines of commercial insurance it
can take several years to determine if premiums charged were adequate
for the related losses.
View [hyperlink, http://www.gao.gov/products/GAO-09-490T] or key
components. For more information, contact Orice M. Williams at (202)
512-86785555 or williamso@gao.gov.
[End of section]
Mr. Chairman and Members of the Subcommittee:
I appreciate the opportunity to participate in today's hearing to
provide preliminary observations on the federal government's assistance
to the American International Group (AIG)--a large financial
conglomerate with an estimated 70 U.S. insurance companies--and the
potential impact of this assistance on U.S. insurance markets,
especially the commercial property/casualty insurance market.[Footnote
1] As you know, the Board of Governors of the Federal Reserve System
(Federal Reserve) and the Federal Reserve Bank of New York (FRBNY)
provided assistance to AIG in September 2008 following its rating
downgrade, which had prompted collateral calls by its counterparties
and raised concerns that a rapid failure of the company would further
destabilize financial markets. However, AIG's condition continued to
decline, and in November 2008 the Federal Reserve and the Department of
the Treasury (Treasury) under the newly created Troubled Asset Relief
Program (TARP) announced plans to restructure AIG's federal assistance
to further strengthen its financial condition and, once again, prevent
the failure of the company. On March 2, 2009, the Federal Reserve and
Treasury provided additional assistance and further restructured the
terms, which raised questions about the ongoing viability of the
company and the likelihood that the federal assistance could be repaid.
The assistance provided to AIG has also raised questions among AIG's
competitors about whether the assistance provided to AIG's parent
company is being used to benefit its insurance companies. AIG's
competitors have argued that the assistance has allowed AIG's insurance
companies to price coverage aggressively compared to the premiums being
charged by the rest of the market, thereby providing AIG with a
competitive advantage, particularly in commercial property/casualty
insurance markets.
My statement today focuses on the preliminary results of our ongoing
review of the federal financial assistance to AIG and its impact on the
U.S. property/casualty insurance market, initiated at the request of
Ranking Member Bachus (full committee) and Chairman Kanjorski
(subcommittee). Specifically, I will discuss (1) the goals and
monitoring of the federal government's assistance to AIG, the
associated setbacks, and challenges to AIG's repayment of this
assistance and (2) the potential effects of this federal assistance to
AIG on the U.S. insurance market, especially the commercial property/
casualty market.
To achieve these objectives, we analyzed publicly available reports,
congressional testimonies, and other documentation issued by the
Federal Reserve, FRBNY, Treasury, Securities and Exchange Commission,
Congressional Research Service, and rating agencies. We also conducted
numerous interviews with officials and staff from the Federal Reserve,
FRBNY, Treasury, three state insurance regulators with major roles in
regulating AIG's insurance companies, the National Association of
Insurance Commissioners (NAIC), five insurance brokers, four large
commercial property/casualty insurers that compete with AIG, two
reinsurers, three rating agencies, two industry observers, and an
association representing purchasers of commercial property/casualty
insurance. Finally, we consulted with a group of actuaries to discuss
our methodology, bolster our understanding of insurance markets, and
evaluate what we heard from others.
We conducted our work from January 2009 to March 2009, in accordance
with all sections of GAO's Quality Assurance Framework that are
relevant to our objectives. The framework requires that we plan and
perform the engagement to obtain sufficient and appropriate evidence to
meet our stated objectives and discuss any limitations in our work. We
believe that the information and data obtained, and the analysis
conducted, provide a reasonable basis for our preliminary findings and
conclusions.
Summary:
Federal financial assistance to AIG, both from the Federal Reserve and
FRBNY through their authority to lend funds to critical non-bank
entities in certain circumstances and from Treasury's TARP, has focused
on preventing the systemic risk that could result from a failure or
further rating downgrade at AIG. The goal of the initial assistance and
subsequent restructurings was to prevent systemic risk from the failure
of AIG by allowing AIG to sell assets and restructure its operations in
an orderly manner. The Federal Reserve has been monitoring AIG's
operations since September, and Treasury will more actively monitor
AIG's operations as well. Although the ongoing federal assistance has
prevented further downgrades in AIG's credit rating, AIG has had mixed
success in fulfilling its other restructuring plans, such as
terminating its securities lending program, selling assets, and
unwinding its AIG Financial Products (AIGFP) portfolio. For example,
AIG has made efforts at selling certain business units and has begun an
overall restructuring, but market and other conditions have prevented
significant asset sales, and most restructuring efforts are still under
way. AIG faces ongoing challenges from the continued overall economic
deterioration and tight credit markets. AIG's ability to repay its
obligations to the federal government has also been impaired by its
deteriorating operations, inability to sell its assets and further
declines in its assets. All of these issues will continue to adversely
impact AIG's ability to repay its government assistance. Table 1
provides an overview of the total federal investment in AIG of $182.5
billion as of March 2, 2009.
Table 1: Amounts of AIG Federal Assistance Used and Authorized as of
March 2, 2009:
Federal Reserve Bank of New York (FRBNY):
Date Program Announced: Program Title:
September 2008;
Revolving Credit Facility;
Amount Borrowed/Used (dollars in millions): Federal Reserve Bank of New
York (FRBNY): $41,969[A,F];
Total Amount Authorized (dollars in millions): Federal Reserve Bank of
New York (FRBNY): $60,000[B,D];
Transaction Details: Federal Reserve Bank of New York (FRBNY):
Revolving loan for the general corporate purposes of AIG and its
subsidiaries, and to pay obligations as they come due. In September
this comment was $85 billion but was reduced to $60 billion. By the end
of the March 2009 the amount will be reduced to no less than $25
billion.
Date Program Announced: Program Title:
November 2008;
Maiden Lane II LLC;
Amount Borrowed/Used (dollars in millions): Federal Reserve Bank of New
York (FRBNY): $19,500;
Total Amount Authorized (dollars in millions): Federal Reserve Bank of
New York (FRBNY): $22,500;
Transaction Details: Federal Reserve Bank of New York (FRBNY): FRBNY
extended credit to Maiden Lane II to purchase residential mortgage-
backed securities from the U.S. securities lending portfolio of AIG
subsidiaries.
Date Program Announced: Program Title:
November 2008;
Maiden Lane III LLC;
Amount Borrowed/Used (dollars in millions): Federal Reserve Bank of New
York (FRBNY): $24,300;
Total Amount Authorized (dollars in millions): Federal Reserve Bank of
New York (FRBNY): $30,000;
Transaction Details: Federal Reserve Bank of New York (FRBNY): FRBNY
extended credit to Maiden Lane III to purchase multi-sector
collateralized debt obligations on which AIG Financial Products had
written credit default swaps.
Date Program Announced: Program Title:
March 2009;
Securitization of domestic life insurance cash flows;
Amount Borrowed/Used (dollars in millions): Federal Reserve Bank of New
York (FRBNY): 0;
Total Amount Authorized (dollars in millions): Federal Reserve Bank of
New York (FRBNY): ($8,500)[C];
Transaction Details: Federal Reserve Bank of New York (FRBNY): FRBNY
loan to special purpose vehicles (SPVs) established by domestic life
insurance subsidiaries of AIG. The SPVs would repay the loans from the
net cash flows they receive from designated blocks of existing life
insurance policies held by the parent insurance companies.
Date Program Announced: Program Title:
March 2009;
Preferred stock in foreign life companies;
Amount Borrowed/Used (dollars in millions): Federal Reserve Bank of New
York (FRBNY): [Empty]; Total Amount Authorized (dollars in millions):
Federal Reserve Bank of New York (FRBNY): ($26,000)[D];
Transaction Details: Federal Reserve Bank of New York (FRBNY):
Preferred interests in two SPVs created to hold all of the outstanding
common stock of two life insurance holding company subsidiaries of AIG.
U.S. Treasury Department[E]:
Date Program Announced: Program Title:
November 2008;
Series D Preferred Stock;
Amount Borrowed/Used (dollars in millions): Federal Reserve Bank of New
York (FRBNY): $40,000[F];
Total Amount Authorized (dollars in millions): Federal Reserve Bank of
New York (FRBNY): $40,000;
Transaction Details: Federal Reserve Bank of New York (FRBNY): AIG
issued Series D preferred stock to Treasury and proceeds of $40 billion
were used to pay down AIG's Revolving Credit Facility balance.
Date Program Announced: Program Title:
March 2009;
Equity Capital Facility[G];
Amount Borrowed/Used (dollars in millions): Federal Reserve Bank of New
York (FRBNY): [Empty];
Total Amount Authorized (dollars in millions): Federal Reserve Bank of
New York (FRBNY): $30,000;
Transaction Details: Federal Reserve Bank of New York (FRBNY): This
facility will be available for AIG to draw down cash as needed over
time in exchange for non-cumulative preferred stock to the U.S.
Treasury.
Credit Facility Trust:
Date Program Announced: Program Title:
September 2008;
Series C Preferred Stock;
Amount Borrowed/Used (dollars in millions): Federal Reserve Bank of New
York (FRBNY): $0.5;
Total Amount Authorized (dollars in millions): Federal Reserve Bank of
New York (FRBNY): [Empty];
Transaction Details: Federal Reserve Bank of New York (FRBNY): Shares
of convertible preferred stock representing an approximately 77.9
percent equity interest in AIG.
Total:
Amount Borrowed/Used (dollars in millions): Federal Reserve Bank of New
York (FRBNY): $125,770[H];
Total Amount Authorized (dollars in millions): Federal Reserve Bank of
New York (FRBNY): $182,500.
Source: Federal Reserve, Treasury, and AIG data.
Notes:
[A] The debt outstanding in the Revolving Credit Facility includes
accrued interest and has been reduced by the $40 billion AIG received
from issuing preferred stock to Treasury.
[B] The Revolving Credit Facility was initially authorized for up to
$85 billion but was reduced to $60 billion in conjunction with the $40
billion paydown of the outstanding debt. The amount of this facility
will be reduced to no less than $25 billion by the end of March 2009
based on the terms of the March 2 restructuring (see notes c and d).
[C] The proceeds from the new loans to SPVs established by domestic
life insurance subsidiaries of AIG will be used to pay down an
equivalent amount of outstanding debt under the Revolving Credit
Facility up to an aggregate of about $8.5 billion. Therefore, this
amount does not affect total authorized amount outstanding.
[D] The revolving credit facility is to be reduced by up to about $26
billion in exchange for preferred interest in two SPVs created to hold
all of the outstanding common stock of two life insurance holding
company subsidiaries of AIG. Therefore, this amount does not affect
total authorized amount outstanding.
[E] Treasury provided the assistance under the Troubled Asset Relief
Program's (TARP) Systemically Significant Failing Institutions (SSFI)
Program.
[F] The $40 billion was used to reduce the outstanding amount of the
Revolving Credit Facility. The outstanding amount of $42 billion
reflects that reduction. As announced in the March 2, 2009
restructuring plan, the Treasury will exchange its existing $40 billion
cumulative perpetual preferred shares for new preferred shares with
revised terms that more closely resemble common equity.
[G] As of March 16, 2009, Treasury was still in the process of
finalizing the terms of this facility.
[H] This excludes the $14 billion obtained from the Commercial Paper
Lending Facility.
[End of table]
As part of our ongoing work on AIG, we are reviewing the potential
impact of AIG's federal assistance on the commercial property/casualty
insurance market. Specifically, we are reviewing potential effects on
AIG's pricing practices. According to some of AIG's competitors,
federal assistance to AIG has allowed AIG's commercial property/
casualty insurance companies to offer coverage at prices that are
inadequate for the risk involved. Conversely, state insurance
regulators, insurance brokers, and insurance buyers said that while AIG
may be pricing somewhat more aggressively than in the past in order to
retain business in light of damage to the parent company's reputation,
they did not see indications that this pricing was inadequate or out of
line with previous AIG pricing practices. Moreover, some have noted
that AIG has lost business because of the problems encountered by the
parent company. As we evaluate these issues, we face a number of
challenges associated with determining the adequacy of commercial
property/casualty premium rates. For example, the terms of the policy
are often negotiated, and pricing adequacy is ultimately determined by
future losses.
Background:
AIG is a holding company that, through its subsidiaries, is engaged in
a broad range of insurance and insurance-related activities in the
United States and abroad, including general insurance, life insurance
and retirement services, financial services, and asset management. The
AIG organization includes the largest domestic life insurer and the
second largest domestic property/casualty insurer, and it has a large
foreign general insurance business. It also has a financial products
division, which has been a key source of AIG's financial difficulties,
particularly AIGFP, which engaged in a wide variety of financial
transactions, including standard and customized financial products.
AIG's Financial Problems Mounted Quickly:
From July 2008 to August 2008, ongoing concerns about AIG's securities
lending program and continuing declines in the value of super senior
collateralized debt obligations (CDO) protected by AIGFP's super senior
credit default swap (CDS) portfolio, along with ratings downgrades of
the CDOs, resulted in AIGFP having to post additional cash collateral,
which raised liquidity issues.[Footnote 2] By early September,
collateral postings and securities lending requirements were placing
increased pressure on the AIG parent company's liquidity. AIG attempted
to raise additional capital in September but was unsuccessful. It was
also unable to secure a bridge loan through a syndicated secured
lending facility. On September 15, 2008, the rating agencies downgraded
AIG's debt rating three notches, resulting in the need for an
additional $20 billion to fund its additional collateral demands and
transaction termination payments. As AIG's share price continued to
fall following the credit rating downgrade, counterparties withheld
payments and refused to transact with AIG. Also around this time, the
insurance regulators no longer allowed AIG's insurance subsidiaries to
lend funds to the parent under a revolving credit facility that AIG
maintained and demanded that any outstanding loans be repaid and that
the facility be terminated.
Overview of Federal Assistance Provided:
Ongoing instability in global credit markets and other issues have
resulted in over $182 billion in federal assistance being made
available to AIG. First, in September 2008, the Federal Reserve created
the Revolving Credit Facility, which was intended to stabilize AIG by
providing it with sufficient liquidity and enabling AIG to dispose of
certain assets in an orderly manner while avoiding undue disruption to
the economy and financial markets (see table 2). The original amount
available under the facility was up to $85 billion. While the amount
borrowed reached $82 billion, the debt was reduced by the proceeds from
AIG's sale of preferred shares to Treasury as well as repayments from
the Fed Securities Lending Agreement and the Commercial Paper Facility.
As of February 18, 2009, AIG had $38.8 billion in debt outstanding
under this facility.
Table 2: Use of Federal Funds and Borrowings Outstanding from the
Federal Reserve Bank of New York Revolving Credit Facility as of
February 18, 2009:
Borrowings: Loans for AIGFP to post for collateral required by its
counterparties on credit default swaps and postings, guaranteed
investment agreements (GIA) and payment of other maturing debts;
Total (millions): $47,547.
Borrowings: Capital contributions to insurance companies[A];
Total (millions): $20,850.
Borrowings: Repayments of obligations to life companies in securities
lending program;
Total (millions): $3,160.
Borrowings: Repayments of short-term inter-company loans by annuity and
life companies to parent company;
Total (millions): $1,528.
Borrowings: Contributions to AIGCFG subsidiaries[A];
Total (millions): $1,686.
Borrowings: Repayments of AIG non-federal debt of AIG parent company;
Total (millions): $2,319.
Borrowings: Funding for AIG's Equity interest in Maiden Lane III[B];
Total (millions): $5,000.
Subtotal: Total (millions): $82,090.
Borrowings: Repayment of Fed facility from proceeds of issuance of
Series D Preferred Stock;
Total (millions): ($40,000).
Borrowings: Repayments of Fed facility from other sources[C];
Total (millions): ($6,890).
Net borrowings: Total (millions): $35,200.
Borrowings: Accrued compounding interest and fees;
Total (millions): $3,631.
Total balances outstanding: Total (millions): $38,831[D].
Sources: AIG Form 10-Q for Sept. 30, 2008, Form 10-K for Dec. 31, 2008.
Notes:
[A] During 2008 and through February 27, 2009, AIG contributed capital
of $22.7 billion (including $18.0 billion borrowed under the Fed
Facility) to its Domestic Life Insurance and Domestic Retirement
Services subsidiaries. AIG also contributed $4.4 billion to the Foreign
Life Insurance companies during 2008 including $4.0 billion from
borrowings under the Fed Facility).
[B] AIG purchased its equity stake in Maiden Lane III with money
borrowed from the Federal Reserve Bank of New York's facility.
[C] Includes repayments from funds received from the Fed Securities
Lending Agreement and the Commercial Paper Funding Facility.
[D] According to the Federal Reserve, the Revolving Credit Facility
balance was $42 billion as of March 2, 2009, but AIG's 10-K provided
details as of February 18, 2009.
[End of table]
Second, in November 2008, the Federal Reserve and Treasury announced
additional assistance to AIG and restructured its original assistance.
On November 9, 2008, the Treasury announced plans to use its
Systemically Significant Failing Institutions (SSFI) Program, under
TARP, to purchase $40 billion in AIG preferred shares. This purchase
allowed AIG to reduce its debt outstanding to the Federal Reserve and
enabled the Federal Reserve to reduce the amount available under the
Revolving Credit Facility from $85 billion to $60 billion. On November
10, 2008, the FRBNY announced plans to lend up to $22.5 billion to
Maiden Lane II LLC, a facility formed to purchase residential mortgage-
backed securities (RMBS) from the U.S. securities lending investment
portfolio of AIG subsidiaries. When this facility was established, it
replaced an interim securities lending agreement with the Federal
Reserve. Also on November 10, FRBNY announced plans to lend up to $30
billion to Maiden Lane III LLC, a FRBNY facility formed to purchase
multi-sector CDOs on which AIGFP had written CDS protection. In
connection with the purchase of the CDOs, AIG's CDS counterparties
agreed to terminate the CDS contracts.
Most recently, on March 2, 2009, the U.S. Treasury and FRBNY announced
plans to further restructure the terms of the assistance. Consistent
with earlier assistance, this was also designed to enhance the
company's capital and liquidity in order to facilitate orderly
restructuring of the company. The restructuring of the assistance
would, among other things, provide the government with interests in two
AIG foreign life insurance companies, as well as certain cash flows
from certain domestic insurance companies, each in exchange for
reducing AIG's Revolving Credit Facility balance. The assistance also
would include a new Treasury equity capital facility that would allow
AIG to draw down up to $30 billion as needed over time in exchange for
newly issued non-cumulative preferred stock to the U.S. Treasury.
Treasury and FRBNY would also exchange the previously issued Series D
preferred stock for Series E preferred stock that would more closely
resemble common stock and provide for non-cumulative dividends. To
date, AIG has not drawn against this facility.
As noted above, some federal assistance was designated for specific
purposes, such as reducing the loan outstanding to the Federal Reserve
or for purchasing specific assets, such as CDOs and RMBS. Other
assistance, such as that available through the Federal Reserve
Revolving Credit Facility, is available to meet the general financial
needs of the parent company and its subsidiaries. Some of the
assistance also places restrictions on actions that AIG can take while
it has loans outstanding to the federal government or as long as the
federal government has an ownership interest in AIG assets, as well as
restrictions on executive compensation. Executive compensation
restrictions for TARP recipients were also included in the American
Recovery and Reinvestment Act of 2009, which was enacted on February
17, 2009. In general, the restrictions prohibit:
* bonus and incentive compensation payments to certain employees,
depending on the amount of TARP assistance received;
* golden parachutes; and:
* compensation plans that encourage risk-taking.
See appendix I for a detailed chronology of events.
Federal Efforts Have Focused on Maintaining and Monitoring AIG's
Solvency, but AIG Faces Challenges in Repaying Federal Assistance:
Federal assistance to AIG has been focused on preventing systemic risk
from a potential AIG failure and monitoring its progress, but AIG faces
challenges in repaying the assistance. Federal Reserve and Treasury
officials have said that a failure of AIG, potentially triggered by
further credit downgrades or additional collateral calls, would result
in liquidity concerns for other financial market participants. A
disorderly failure of AIG would not only create difficulties for AIG's
counterparties as described, but could further erode confidence in and
uncertainty about the viability of other financial institutions. This,
in turn, would further constrict the flow of credit to households and
businesses, potentially deepening and lengthening the current
recession. If the ultimate goal is avoiding the failure of AIG, the
Federal Reserve and Treasury have achieved that goal in the short-term.
However, maintaining solvency has required federal assistance beyond
that provided in September and November 2008, and rating companies have
stated that their current ratings are contingent on continued federal
support for AIG. AIG and federal regulators acknowledge that there may
be a need for further assistance given the significant challenges AIG
continues to face. Therefore, more time is required to determine if the
goal will be fully achieved in the long-term.
Federal and State Monitoring Efforts Are Focused on AIG Solvency:
We asked Treasury and the Federal Reserve how they were monitoring
AIG's progress toward reaching the goals of the federal financial
assistance and AIG's compliance with the restrictions placed upon it as
a condition of receiving the assistance. According to Treasury and
Federal Reserve officials, the agencies are working together to monitor
AIG's solvency by reviewing the reports required by the terms of the
financial assistance, and the Federal Reserve is in contact daily with
AIG officials regarding AIG's liquidity needs and their efforts to sell
the company's assets. AIG regularly files several reports with FRBNY,
including daily cash flow reports, reports identifying risk areas
within the company, and daily liquidity requests/cash flow forecasts,
allowing the Federal Reserve to monitor AIG's liquidity. Also, AIG has
a divestiture team that meets at least weekly with the Federal Reserve
to discuss potential sales deals, including bids from potential buyers,
financing, and other terms of sales agreements, so that the Federal
Reserve can monitor AIG's efforts to sell its assets.
The Federal Reserve and Treasury said that they are monitoring the
various federal agreements with AIG, and these agreements place
restrictions on AIG's use of the funds. For example, the Federal
Reserve monitors restrictions on the Revolving Credit Facility,
including whether AIG has inappropriately paid dividends or financed
extraordinary corporate actions like acquisitions. According to
Treasury officials, it is in the process of finalizing new executive
compensation requirements based on the American Recovery and
Reinvestment Act of 2009, and will begin monitoring AIG's compliance
with those regulations once they are in place. This is an area we will
continue to monitor as part of our broader TARP oversight.
State insurance regulators are responsible for monitoring the solvency
of insurance companies generally, as well as for approving transactions
regarding those companies, such as changes in control or significant
transactions with the parent company or other subsidiaries. For
example, regulators told us that AIG's insurance companies, like all
insurance companies, file quarterly reports with them. Since AIG began
receiving federal assistance in September 2008, regulators also said
that AIG's insurance companies have been submitting additional reports
on their liquidity, investment income, and statistics on surrender and
renewal of policies, sometimes on a daily or weekly basis. The various
regulators also coordinate their monitoring of the companies' insurance
lines. State regulators also evaluate potential sales of AIG's domestic
insurance companies. NAIC formed a working group designed to expedite
any regulatory approvals required for asset sales, with a goal of
completing the approvals within 45 days of filing for a sale.
AIG Faces a Number of Challenges to Its Ability to Repay Its Federal
Funds:
AIG's restructuring has hinged on efforts in three areas: (1)
terminating its CDS portfolio, (2) terminating its securities lending
program, and (3) selling assets. Federal assistance was targeted to the
first two areas that posed a significant risk to AIG's solvency--
AIGFP's CDS portfolio and the securities lending program--and the risks
from both activities appear to have been reduced, but some risks
remain. One arrangement, Maiden Lane III--the FRBNY facility created to
purchase CDOs--has purchased approximately $24.3 billion in multi-
sector CDOs (with a par value of approximately $62 billion), which were
the assets underlying the CDS protection that AIG sold. Concurrent with
the purchase of the underlying CDOs, AIGFP counterparties agreed to
cancel the CDS written on the CDOs, thus unwinding significant portions
of AIGFP's CDS portfolio. According to AIG, some arrangements did not
qualify for sale to the facility, generally either because the
counterparties did not own the instruments on which CDS were written or
because they were in denominations other than U.S. dollars. As of
February 18, 2009, approximately $12.2 billion in notional amounts of
CDS remained with AIG. According to AIG, these remaining CDS continue
to present a risk to AIG, as further losses from these assets could
require additional funding. A second FRBNY facility--Maiden Lane II--
purchased approximately $19.5 billion in RMBS and other assets related
to the securities lending program. Both the Maiden Lane II and Maiden
Lane III facilities allow AIG to participate in the residual proceeds
after the FRBNY loan has been repaid. However, AIG faces other
potential losses from other investments.
The federal assistance has allowed AIG to undertake restructuring
efforts, which continue. As of September 2008, AIG was to wind down the
operations of AIGFP and sell certain businesses. In October 2008, the
company announced plans to sell some of its life insurance operations
and other businesses. AIG is continuing to wind down AIGFP but expects
the process to take at least several years in order to avoid further
losses given the current market conditions. AIG has been unable to sell
its insurance assets for prices it deems acceptable given the general
state of the global economy. As a result, the plan has been modified,
and the federal government will now assume an ownership interest in
some of AIG's life insurance companies. The federal government's
ownership stake will be a percentage of the fair market value of these
companies based on valuations acceptable to the Federal Reserve. In
addition, AIG plans to consolidate its commercial property/casualty
insurance operations in a free-standing entity and potentially offer an
equity interest in part of this new entity to public investors.
Asset sales have been difficult, not only because tight credit markets
are limiting buyers' ability to obtain the capital needed to purchase
the companies, but also because of challenges faced by AIG in retaining
key employees, who contribute to the value of the company. In addition,
the timely sale of CDOs and RMBS held by the Federal Reserve facilities
will be challenging, not only because it may be difficult to value
those assets, but because many are tied to home values, which have been
in decline.
AIG's ongoing financial problems have resulted in additional assistance
and restructuring of the terms of the original assistance, and AIG
faces numerous, significant challenges to its ability to repay federal
assistance in the future. AIG's ability to repay the federal government
hinges on it remaining solvent and effectively restructuring the
organization, including the sale of subsidiaries. The federal
government recouping its assistance also depends in part on FRBNY being
able to obtain a satisfactory return on the sale of the CDO-and RMBS-
related assets purchased by Maiden Lane II and III.
AIG's ability to pay interest and dividend payments has been and may
continue to be a challenge because its ability to make payments is
dependent on the profitability of AIG operations, which face a number
of hurdles. As of December 31, 2008, AIG insurance subsidiaries had
statutory capital levels that exceeded the minimum requirements.
However, damage to AIG's reputation has made it difficult for its
insurance companies to maintain current business and write new
business. In addition, profitability is also dependent on the overall
state of the economy--many of AIG's insurance premium sources are tied
to economic activity, such as payroll--and its insurers, especially its
life insurers, depend on strong investment returns. To the extent the
overall economy is experiencing difficulty, it will present challenges
to the profitable operations of AIG's insurance companies. While recent
federal assistance has been restructured to reduce AIG's interest and
dividend payment requirements, it is too soon to tell whether further
assistance or further restructuring will be needed in the future.
Some of AIG's Competitors Claim that AIG's Commercial Insurance Pricing
Is Out of Line With Its Risks but Other Insurance Industry Participants
and Observers Disagree:
We are examining the potential effect of federal assistance to AIG on
the insurance market, particularly AIG's pricing practices within the
commercial property/casualty market. Market participants (actuaries,
regulators, brokers, customers, and insurance companies) we talked with
indicated that, foremost, insurance premium rates follow an insurance
underwriting cycle that is generally characterized by a long period of
"soft market" conditions, where premium rates are relatively low and
underwriting standards are less stringent, followed by a much shorter
period of "hard market" conditions, where premium rates flatten or
increase and underwriting standards are more stringent. They explained
that starting with the September 11, 2001, terrorist attacks and
continuing until late 2003 or early 2004, the commercial property/
casualty market was in a hard market, but since this time the markets
have softened and premium rates have been declining. For example,
according to the Council of Independent Agents and Brokers (CIAB)
surveys, quarterly changes in commercial property/casualty premium
rates have been negative (falling) for all commercial line accounts
since the second quarter of 2004 (except for catastrophe-exposed
property lines in early 2006), and while the magnitude of the changes
leveled off in the last quarter of 2008, the average quarterly premium
rate change was still negative in that period.
Industry participants also said that premiums charged by commercial
property/casualty insurers for a given coverage are influenced by
several factors that could allow one insurer to price lower than
another on a given risk and that AIG Commercial Insurance historically
had been able to take advantage of several of these factors. Such
factors include a long history of experience with complex risks, a
lower operating expense ratio relative to competitors, global
operations that allow offsetting risks, and the ability to leverage the
size and the financial strength of the parent company to write larger
coverage amounts than competitors, in some cases without the need to
purchase reinsurance. It is not yet clear to what extent the current
financial difficulties the AIG parent company may have diminished these
advantages for AIG Commercial Insurance.
Some insurers we spoke with said that they had observed instances, in
some cases numerous instances, where AIG had sold commercial property/
casualty coverage for a price that these insurers believed was
inadequate for the risk involved. They cited examples where AIG
Commercial Insurance's prices had decreased significantly from the
prior year's price, when circumstances appeared to indicate that higher
prices were warranted. Some insurers said that they had brought several
of these instances to the attention of the relevant state insurance
regulator. Insurers expressed concern that while current market
conditions would dictate increased prices in most commercial property/
casualty lines of insurance, they believe that AIG Commercial Insurance
has decreased its prices. They added that when such pricing activity is
combined with AIG Commercial Insurance's market power, AIG Commercial
Insurance can prevent prices from increasing and thus hurt other
insurers' ability to price insurance at a cost adequate to cover the
risk involved. The insurers said they believed that AIG Commercial
Insurance's recent pricing behavior is the result of its desire to
retain existing business in the face of concerns over the financial
health of its parent company, and some suggested that the federal
financial assistance is providing them the means to do this. For
example, some suggested that AIG Commercial Insurance officials know
that the federal government will not let them fail, so they can charge
very low prices without fear of the consequences when the premiums
collected turn out to be less than the losses those premiums were meant
to cover. Some also suggested that buyers in the market are choosing to
stay with AIG Commercial Insurance because they also believe that the
insurance company is now backed by the federal government and that
their losses will ultimately be covered.
AIG told us that AIG Commercial Insurance has the biggest policyholder
surplus in the industry and that they are solvent and financially
sound. They maintained that they are charging prices adequate for the
risk being covered and that their commercial insurance rates have been
mirroring the overall trends in the current soft market. That is, they
indicated that their rates have been declining at an increasingly
slower pace since the fourth quarter of 2008, and in some cases have
increased. They also cited other factors that they said would indicate
that they were not pricing inadequately or taking market share from
other companies. First, AIG Commercial Insurance told us that they have
actually been losing market share because the financial situation of
the parent company had impacted the reputation of the AIG commercial
insurance companies. In addition, they cited instances where
competitors were using the AIG parent company's financial problems as a
way to discourage customers from buying AIG commercial insurance
coverage. Finally, AIG Commercial Insurance provided us with examples
of recent contracts that they have lost to competitor bids that were
below their own. However, AIG Commercial Insurance acknowledges that
these examples reflect the nature of the business, not necessarily
inappropriate pricing by the competitors.
State insurance regulators, insurance brokers, and insurance buyers
that we have spoken to said that they have seen no indications that
AIG's commercial property/casualty insurers are selling coverage at
prices inadequate to cover the risk involved:
* State insurance regulators we spoke to said that they generally do
not closely watch commercial insurance rates because they may have been
largely deregulated by the states, as well as because of the highly
negotiated nature and complexity of many commercial lines of insurance.
However, they said that they investigate complaints about pricing
activities and monitor insurer solvency measures that would indicate
inadequate pricing--although in some lines the consequences of such
pricing may not show up in these measures for several years. State
regulators indicated that complaints of pricing inadequate for the risk
involved would need to be numerous enough to indicate a potential
systemic problem or would need to prove an intentional predatory
strategy from the part of a particular company. Based on what they have
reviewed, the regulators we spoke with said they have seen no
indications of inadequate pricing by AIG's commercial property/casualty
insurers.
* Insurance brokers we spoke with said that when helping a customer
obtain coverage, they see all of the prices and conditions offered by
each insurer placing a bid on that coverage. They also indicated that
commercial property/casualty insurance is competitive, and that in
several lines of commercial insurance, especially where large coverage
amounts are involved, prices offered by insurers can deviate
significantly on the same risk. For example, one broker said that
insurers' bids on large policies regularly vary by as much as 20
percent below and above the median bid. Several brokers told us that
AIG Commercial Insurance has historically priced aggressively in some
lines, and that while in some instances in the past several months AIG
Commercial Insurance may have priced more aggressively in order to
retain certain customers, it did not appear to be a widespread practice
and was viewed as an expected response given the reputational hit the
company has taken. They also cited instances where AIG Commercial
Insurance has lost business because other insurers' prices were lower
than theirs.
* Insurance buyers, who also see all of the prices and conditions
offered by each insurer bidding on their coverage, said that AIG
Commercial Insurance is known to be competitive in some lines and that
they have not seen any indications of a widespread change in pricing by
AIG's commercial insurers. They also said that they would recognize,
and be concerned about, an insurer charging suspiciously low rates for
the coverage because it would create a risk that the insurer would be
unable to pay the policyholder's claim.
However, according to insurance regulators and other industry
participants, for many lines of commercial insurance, determining
whether prices charged by a commercial property/casualty insurer are
adequate for the risk involved pose a number of challenges:
* In many lines of commercial insurance, in the case of very large
risks as opposed to routine policies, the terms of coverage, in
addition to the price, are often negotiated, resulting in unique
policies. For example, the amount of a claim the policyholder would be
responsible for, and the collateral the policyholder would be required
to post to guarantee payment of this amount, would be negotiated.
Without knowing all the terms of an individual policy, it could be
difficult to determine the extent to which that policy was priced
adequately for the risk involved.
* Insurers price policies based on predictions of future losses, which
contain a number of subjective assumptions about risk, interest rates,
litigation costs, and other costs. Underwriters may price a given risk
differently and still be able to defend the reasoning behind their
calculations.
* The most concrete indication of systematic inadequate pricing comes
several years later, depending on how far into the future the losses
associated with the policies in question are realized. However, a
company may ultimately end up with higher-than-expected losses even if
it charged actuarially determined premiums using reasonable assumptions
at the time the policies were written.
In closing, the extent to which the assistance provided by the
government will achieve its goal of preventing systemic risk continues
to unfold and will be largely influenced by AIG's success in meeting
its ongoing challenges in trying to restructure its operations.
Likewise, it is too soon to tell whether AIG will be able to repay its
outstanding debt to the federal government, which in large part depends
on the stability of the overall financial system. While we have found
no evidence that federal assistance has been provided directly to AIG's
property/casualty insurers, as has been the case for AIG life insurers,
AIG's insurance companies have likely received some indirect benefit to
the extent that the property/casualty insurers would have been
adversely affected by a credit downgrade or failure of the AIG parent.
While we are continuing to complete our work in the area, some of AIG's
competitors claim that AIG's commercial insurance pricing is out of
line with its risks but other insurance industry participants and
observers disagree. At this time, we have not drawn any final
conclusions about how the assistance has impacted the overall
competitiveness of the commercial property/casualty market.
Mr. Chairman, this completes my prepared statement. I would be pleased
to answer any questions that you or Members of the Subcommittee may
have.
Contact and Acknowledgements:
For further information about this testimony, please contact Orice M.
Williams at (202) 512-8678 or williamso@gao.gov. Contact points for our
Offices of Congressional Relations and Public Affairs may be found on
the last page of this statement. Individuals making key contributions
to this testimony include Patrick Ward (Assistant Director), Joe
Applebaum (Chief Actuary), Susan Offutt (Chief Economist), Silvia
Arbelaez-Ellis, Tania Calhoun, John Forrester, Dana Hopings, Jennifer
Schwartz, and Melvin Thomas.
[End of section]
Appendix I: Timeline of AIG Financial Difficulties Leading Up to
Federal Assistance:
* July 2008 to August 31, 2008:
- The super senior collateralized debt obligation (CDO) securities
protected by American International Group Financial Products' (AIGFP)
super senior credit default swap (CDS) portfolio continued to decline
and ratings of CDO securities were downgraded, resulting in AIGFP
posting additional $5.9 billion collateral.
- AIG was doing a strategic review of AIG's businesses and reviewing
measures to address the liquidity concerns in AIG's securities lending
portfolio and to address the ongoing collateral calls regarding AIGFP's
super senior multi-sector CDS portfolio, which as of July 31, 2008,
totaled $16.1 billion.
* Early September 2008: These collateral postings and securities
lending requirements were placing increasing stress on the AIG parent
company's liquidity.
* September 8 to September 12, 2008: AIG's common stock price declined
from $22.76 to $12.14, making it unlikely that AIG would be able to
raise the large amounts of capital that would be necessary if AIG's
long-term debt ratings were downgraded.
* September 11 or 12, 2008: AIG approached the Federal Reserve with two
concerns:
- AIG had significant losses in the first two quarters of calendar year
2008, primarily attributable to AIGFP and decreasing values in their
securities, leading AIG to request to place large amounts of cash
collateral.
- AIG's investments in mortgage-backed securities (MBS) were very
illiquid. Consequently, AIG would not be able to liquidate its assets
to meet the demands of counterparties. Since AIG is not regulated by
the Federal Reserve, the agency was not aware of the company's
financial problems.
Also, because AIG was facing a downgrade in its credit rating the next
week, it needed immediate liquidity help. Over the weekend, the Federal
Reserve was examining AIG to determine if it was systemically
important, meaning that its failure would have a broader effect on the
economy. This was the same weekend that Lehman Brothers went into
bankruptcy.
* September 12, 2008:
- Standard & Poor's (S&P), placed AIG on CreditWatch with negative
implications and noted that upon completion of its review, the agency
could affirm the AIG parent company's current rating of AA-or lower the
rating by one to three notches.
- AIG's subsidiaries, International Lease Finance Corporation (ILFC)
and American General Finance, Inc. (AGF), were unable to replace all of
their maturing commercial paper with new issuances of commercial paper.
As a result, AIG advanced loans to these subsidiaries to meet their
commercial paper obligations.
* September 13 and 14, 2008: AIG accelerated the process of attempting
to raise additional capital and discussed potential capital injections
and other liquidity measures with private equity firms, sovereign
wealth funds and other potential investors. AIG also met with
Blackstone Advisory Services LP to discuss possible options.
* September 15, 2008:
- AIG was again unable to access the commercial paper market for its
primary commercial paper programs, AIG Funding, ILFC and AGF. AIG
advanced loans to ILFC and AGF to meet their funding obligations.
- AIG met with representatives of Goldman, Sachs & Co., J.P. Morgan,
and the Federal Reserve Bank of New York (FRBNY) to discuss the
creation of a $75 billion secured lending facility.
- S&P, Moody's, and Fitch Ratings (Fitch) downgraded AIG's long-term
debt rating. As a result, AIGFP estimated that it needed in excess of
$20 billion to fund additional collateral demands and transaction
termination payments in a short period of time.
* September 15, 2008: AIG's common stock price fell to $4.76 per share.
* September 16, 2008:
- AIG's strategy to obtain private financing failed. Goldman, Sachs &
Co. and J.P. Morgan were unable to syndicate a lending facility.
Consequently, counterparties were withholding payments from AIG, and
AIG was unable to borrow in the short-term lending markets.
- To provide liquidity, both ILFC and AGF drew down on their existing
revolving credit facilities, resulting in borrowings of approximately
$6.5 billion and $4.6 billion, respectively.
- AIG was notified by its insurance regulators that it would no longer
be permitted to borrow funds from its insurance company subsidiaries
under a revolving credit facility that AIG maintained with certain of
its insurance subsidiaries acting as lenders. Subsequently, the
insurance regulators required AIG to repay any outstanding loans under
that facility and to terminate it.
- The Federal Reserve extended the facility to AIG to prevent systemic
failure. AIG had no viable private sector solution to its liquidity
issues. It received the terms of a secured lending agreement that FRBNY
was prepared to provide. AIG estimated that it had an immediate need
for cash in excess of its available liquid resources. That night, AIG's
Board of Directors approved borrowing from FRBNY based on a term sheet
that set forth the terms of the secured credit agreement and related
equity participation.
* September 22, 2008:
- The inter-company facility was terminated effective September 22,
2008.
- AIG entered into the Fed Credit Agreement in the form of a two-year
secured loan.
[End of section]
Footnotes:
[1] AIG comprises at least 223 companies and it has operations in 130
countries and jurisdictions worldwide.
[2] The securities lending program allowed insurance companies,
primarily the life insurance companies, to lend securities in return
for cash collateral that was invested in residential mortgage-backed
securities (RMBS). When the value of these securities declined in 2007,
AIG incurred significant losses when it had to return the cash
collateral when its borrowed securities were returned. Collateralized
debt obligations are securities backed by a pool of bonds, loans, or
other assets. Credit default swaps are bilateral contracts that are
sold over the counter and transfer credit risks from one party to
another. The seller, who is offering credit protection, agrees, in
return for a periodic fee, to compensate the buyer, who is purchasing
it, if a specified credit event, such as default, occurs.
[End of section]
GAO's Mission:
The Government Accountability Office, the audit, evaluation and
investigative arm of Congress, exists to support Congress in meeting
its constitutional responsibilities and to help improve the performance
and accountability of the federal government for the American people.
GAO examines the use of public funds; evaluates federal programs and
policies; and provides analyses, recommendations, and other assistance
to help Congress make informed oversight, policy, and funding
decisions. GAO's commitment to good government is reflected in its core
values of accountability, integrity, and reliability.
Obtaining Copies of GAO Reports and Testimony:
The fastest and easiest way to obtain copies of GAO documents at no
cost is through GAO's Web site [hyperlink, http://www.gao.gov]. Each
weekday, GAO posts newly released reports, testimony, and
correspondence on its Web site. To have GAO e-mail you a list of newly
posted products every afternoon, go to [hyperlink, http://www.gao.gov]
and select "E-mail Updates."
Order by Phone:
The price of each GAO publication reflects GAO‘s actual cost of
production and distribution and depends on the number of pages in the
publication and whether the publication is printed in color or black and
white. Pricing and ordering information is posted on GAO‘s Web site,
[hyperlink, http://www.gao.gov/ordering.htm].
Place orders by calling (202) 512-6000, toll free (866) 801-7077, or
TDD (202) 512-2537.
Orders may be paid for using American Express, Discover Card,
MasterCard, Visa, check, or money order. Call for additional
information.
To Report Fraud, Waste, and Abuse in Federal Programs:
Contact:
Web site: [hyperlink, http://www.gao.gov/fraudnet/fraudnet.htm]:
E-mail: fraudnet@gao.gov:
Automated answering system: (800) 424-5454 or (202) 512-7470:
Congressional Relations:
Ralph Dawn, Managing Director, dawnr@gao.gov:
(202) 512-4400:
U.S. Government Accountability Office:
441 G Street NW, Room 7125:
Washington, D.C. 20548:
Public Affairs:
Chuck Young, Managing Director, youngc1@gao.gov:
(202) 512-4800:
U.S. Government Accountability Office:
441 G Street NW, Room 7149:
Washington, D.C. 20548: