Rather, the New York Fed's actions have consistently been directed at securing its objectives as lender. As any lender in our position would do, the New York Fed has put into place a loan agreement that contains covenants designed to help ensure ultimate repayment of the loan – but these creditor's rights do not create an ability to manage AIG. Responsibility for AIG's day-to-day affairs continues to rest with AIG's chief executive officer, Edward Liddy, under the oversight of AIG's board of directors. Mr. Liddy, who has only become involved with AIG in a public-spirited attempt to resolve its troubled affairs, has  BIS Review 35/2009  1  made strides in dealing with AIG's opaque corporate structure, lack of centralized controls and complex risk exposures, but much remains to be done. In light of the inherent conflicts that would arise from either the U.S. government or the Federal Reserve exerting ownership control over the world's largest insurer, the Federal Reserve, with the support of the Treasury Department, directed in the loan agreement that an approximately 77.9 percent equity interest in AIG be issued to an independent trust established for the sole benefit of the United States Treasury. The trust, which now holds that controlling equity interest, is overseen by three independent trustees who are of the highest integrity and who have considerable experience leading major companies.
Notably, we have recently agreed in principle to accept preferred interests in two of AIG's large foreign life insurance subsidiaries, AIA and ALICO, in order to make repayment of our loan less dependent on forced divestitures into a depressed acquisition market. Although it will take time, we still expect that the proceeds from asset sales should enable AIG to repay the New York Fed in full. In all that we have done, we have been motivated by two goals: to preserve the stability of the U.S. economy and to protect the U.S. taxpayer. The threat of a major systemic risk event has been averted by honoring all of AIG's contractual obligations around the globe – from insurance policy obligations owed to individuals, municipalities and businesses across the U.S., to the posting of collateral under credit default swap arrangements with the full range of counterparties recently disclosed. As unattractive as certain aspects of this treatment may be, these negative aspects have followed unavoidably from the decision to avert a systemically destructive bankruptcy. I look forward to your questions today and, in the longer term, to working with you and your staffs on the broader public policy questions – such as formulation of a resolution regime for institutions like AIG and consideration of the appropriate supervisory structure for OTC derivatives – that are posed by the events at AIG. Thank you. BIS Review 35/2009  3