Greenberg wants more info from AIG on U.S. deal

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By Lilla Zuill

NEW YORK (Reuters) - Maurice "Hank" Greenberg, the former chief executive of American International Group Inc , is seeking more information from the company on its agreement with the U.S. government over assets that have cost the giant insurer dearly.

Greenberg, a large AIG shareholder, wrote to Chief Executive Edward Liddy on Monday, asking for more disclosure on the government's agreement to buy up to $70 billion in toxic mortgage assets underlying AIG's credit default swaps (CDS), a type of debt guarantee.

"Investors in AIG securities need to know the answers to these questions and U.S. taxpayers should know how their tax dollars have been used," he said in the letter.

Greenberg wants to know the identity of counterparties to these agreements, and payments so far to these parties.

The need to post increasing amounts of collateral to counterparties has left AIG deeply in the red over the last four quarters. It has lost $42.5 billion in that period.

Greenberg, who ran AIG for 38 years, also asked for more information on a second government agreement to transfer residential mortgage-backed securities from a securities lending portfolio.

AIG did not immediately comment on Greenberg's letter.

Greenberg wants the government to do more for AIG, suggesting it provide guarantees to cover counterparty collateral agreements, according to an opinion piece in the Wall Street Journal on Tuesday.

The government is providing the guarantee to Citigroup Inc , agreeing to shoulder most losses on about $306 billion of the bank's risky assets.

MAIDEN LANE

Late Friday, the government said it had established two funds -- Maiden Lane II LLC and Maiden Lane III LLC -- to hold the assets under its two programs to assume AIG's worst mortgage liabilities.

This followed the U.S. Federal Reserve forming Maiden Lane LLC earlier in the year to hold about $30 billion in risky assets that had been held by Bear Stearns before JPMorgan Chase & Co agreed to take over the faltering investment bank.

Under the U.S. agreement with AIG, the insurer puts $5 billion and $1 billion into each fund, while the government will provide $30 billion for Maiden III and $22.5 billion for Maiden II, respectively.

To date, the Federal Reserve has funded Maiden III, the facility which will be used to buy assets underlying CDS, with about $15 billion, according to a statement late Friday.

It also paid $40 billion to AIG in exchange for preferred shares. AIG has used those funds to put up the $5 billion for Maiden III, and most of the rest to pay down part of a credit facility first extended by the government in September.

AIG's borrowings under both the credit facility and a separate loan to cover its securities lending program had fallen to $55.9 billion as of November 26, according to the Federal Reserve statement. It had stood at $87 billion a week earlier.

The amount borrowed under the credit facility is $34.3 billion, and $20.5 billion for securities lending, plus interest and fees.

Once the government funds Maiden II, the amount AIG will have borrowed under the securities lending agreement is expected to be wiped out.

At that point, AIG will be left with a $60 billion credit facility from the government, reduced from $85 billion extended in September. The giant insurer is expected to pay down the loan with the proceeds of asset sales.

So far, it has announced one deal -- the sale of AIG Private Bank to Abu Dhabi-based Aabar Investments PJSC for $254 million.

As part of its bailout of AIG, the federal government received an 80 percent stake in the insurer. This has heavily diluted shareholders such as Greenberg, who had controlled about 10 percent of outstanding shares through stock he owned personally, and those held by companies he runs.

Some large investors, with Greenberg's support, are seeking to convince the government to reduce its stake as AIG attracts private investments.

(Reporting by Lilla Zuill; editing by Jeffrey Benkoe)

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