Panel II Of A Hearing Of The House Oversight And Government Reform Committee- AIG: Where Is The Taxpayers' Money Going?
Statement
Panel II Of A Hearing Of The House Oversight And Government Reform Committee- Aig: Where Is The Taxpayers' Money Going?
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REP. TOWNS: I'd like to welcome the second panel. Let me say it's a longstanding tradition here that we swear all of our witnesses in. So if you would please stand and raise your right hand.
(The witnesses are sworn in.)
REP. TOWNS: Let the record reflect that the witnesses all answered in the affirmative.
Let me suggest an order. Why don't we go in this order: Mr. Feldberg go first and then of course, Ms. Considine; and Mr. Foshee would be next and the Professor Verret.
Why don't we just proceed right down the line.
MR. FELDBERG: (Off mike.)
REP. : If you could pull microphone up and turn it on, please. Thank you.
MR. FELDBERG: (Off mike.)
REP. TOWNS: Let me just --
MR. FELDBERG: How about now?
REP. TOWNS: Just yield for a second.
I guess I need to talk about your background a little bit for members of the committee.
Ms. Jill Considine, who currently serves as chairman of the board of Fulcrum Group, a fund administrator for the hedge fund industry. In 2004, Ms. Considine ended her six-year term as a member of the board of the Federal Reserve Bank of New York where she served as chairwoman of the audit and operations list committee.
We also have Mr. Chester Feldberg. Mr. Feldberg served for nine years as senior official at the Federal Reserve Bank of New York. He served as chairman of Barclays Americas from 19 -- I'm sorry -- from 2000 to 2008.
Mr. Douglas Foshee is currently CEO of El Paso Corporation, a natural gas producer. Mr. Foshee served as executive vice president chief operating officer for Halliburton Corporation, prior to joining El Paso in 2003. Mr. Foshee also serves as chairman of the Federal Reserve Bank of Dallas, Houston branch.
Our final witness is Professor J.W. Verret, a senior scholar at the Mercatus Center at George Mason University. Professor Verret will share his concerns about the AIG trust agreement.
So with that, we can move forward. Feldberg.
MR. FELDBERG: Chairman Towns, Ranking Member Issa and members of the committee, my name's Chester Feldberg and I'm a trustee of the AIG Credit Facility Trust.
I'm appearing today with Jill Considine and Doug Foshee, my fellow trustees, at the request of the committee in connection with its hearing on the collapse and federal rescue of AIG.
We've submitted a joint written statement which speaks for all of us. As trustees, we operate collectively. While each of us will make brief oral statements addressing different aspects of our work, I would stress the collaborative nature of efforts and of our decision- making process.
I was going to comment next on my background and experience, but the chairman has covered that so I will move forward.
The chairman's letter to each of us posed the question: Is the U.S. taxpayer investment in AIG being properly protected? This is the critical question. It motivates all of our deliberations and all of our actions. Let me now turn to the background of the trust arrangement.
The trust was established by the New York Fed for the purpose of acquiring, holding and ultimately disposing of approximately 77.9 percent of the voting stock of AIG. Under the terms of the trust agreement, we the trustees are charged with exercising the voting rights of the AIG shares held in the trust in the best interests of the U.S. treasury and with a view toward maximizing the value of that stock.
As we understand it, the rational for establishing a trust arrangement administrated by independent trustees was concern by the Fed and the Treasury regarding potential conflicts of interest if the controlling interest was held by either governmental entity.
Each of us was contacted last fall by representatives of the New York Fed and asked to serve as a trustee of the proposed trust. After much reflection, each of us ultimately decided to accept this challenge and responsibility.
On January 16, 2009, we were appointed as trustees by the New York Fed and entered into the trust agreement, which we are attaching as part of our written testimony.
We immediately began organizational work in educating ourselves about the task that lay ahead, but it was not until March 4th that AIG issued stock for the trust and we commenced our formal responsibilities as trustees.
Since then, we've been impressed with the extraordinary challenges that we face in exercising our responsibilities. In fact, many of the factors relevant to whether the value of the taxpayer stock can be maximized are not within our control. Such factors include what the market and the economy will look like when company assets are sold or restructured, what decisions the Federal Reserve or the Treasury will make concerning ongoing financial assistance to the company, what constraints will be imposed by new legislation or regulation on the company's ability to retract or retain the people needed to keep the company running and effectively implement the restructuring plan, and finally, whether continuing adverse publicity will affect the company's ability to maintain the value of its businesses.
Each of these factors individually or in combination will have great influence on the ultimate value of the enterprise. And no one can confidentially predict the final outcome at this time.
The trustees are committed to seeing through the next chapter in the company's history in the best interests of the Treasury and the taxpayers of this nation. We're under no allusions that our task will be easy. Indeed, it may be the most challenging task any of us has undertaken in our professional careers.
In carrying out our role, we will be guided by our independent assessment and judgment as to what course of action will best protect the interest of the beneficial of the trust, the U.S. Treasury and the U.S. taxpayer. We know that to be successful, we'll need the ongoing support of the Congress, the administration and the Federal Reserve. In the end, we are all working toward the same goal.
I appreciate the opportunity to appear before this committee. My colleague, Jill Considine, will now explain our duties and limitations under the trust agreement in more detail. Thank you.
REP. TOWNS: Ms. Considine, you're recognized for five minutes.
MS. CONSIDINE: Mr. Chairman, Ranking Member Issa and members of the committee, my name is Jill Considine and I want to thank you for this opportunity to testify and share information pertaining to the responsibilities of the trustee of the AIG Credit Facility Trust.
I'd like to begin by describing a little bit my experience in both government and in the financial services industry.
I served as a banker, a banking regulator and as the chief executive officer of systemically important financial institutions. Each of these experiences' proven invaluable as I participate with the other trustees to execute our responsibilities and maximize the government's investment in AIG and most importantly, protect the interest of the American taxpayer.
I previously served as CEO of the 1st Women Bank, was the New York State banking superintendent and served as president of the New York Clearinghouse Association. In addition, I was the chairman and the CEO of the Depository Trust and Clearing Corporation. And as was mentioned, was a member of the board of the Federal Reserve Bank of New York.
I agreed to serve as a trustee, understanding the importance and urgency of the mission we were being asked to undertake. And with a sense of duty to the taxpayers, whose interest to shareholders and AIG we were asked to represent.
Now, with respect to the particular role we had been assigned, we know that we're in unchartered waters. There's no history, no precedent to which we can look for guidance. Our anchor is the trust agreement itself, which describes our roles, our responsibilities and also our limitations.
The primary responsibility on trust agreement to vote for stock that we hold at all meetings of the stockholders and most importantly, in connection with the election of directors of AIG to develop and execute a plan to sell or otherwise dispose of the trust stock in a value-maximizing manner, and of course, to work with senior management and the board of directors of AIG to ensure that corporate governance procedures are satisfactory to us.
However, equally important, the trust agreement says what we should not do. And we cannot directly or indirectly become directors of AIG or be responsible for managing the day-to-day operations of AIG or any of the subsidiaries. Explicitly by the terms of the trust, we must lead the day-to-day direction and management at AIG to the senior officers of the company and its board of directors.
Now, there's been a lot of conversation today and in the past about the congressional and public concern over bonuses paid.
And we share these concerns about the payments of large bonuses at the time when AIG was failing and being rescued by the taxpayers.
However, we are committed to ensuring that issues of compensation at AIG going forward are addressed in a thoughtful, prudent and fair manner. It is essential that the board of directors focus on compensation, because a fair and effective compensation system is truly necessary to ensure the successful restructuring of AIG and the recovery of the taxpayers' investment.
In our view, compensation should be designed to be performance- based, to reward long-term sustainable value creation, and align employees' compensation with those of the shareholder over the long term. It should not be structured to encourage and reward undue risk- taking or short-term results.
To these ends, we've asked Mr. Liddy, together with senior management at AIG, the board and the appropriate committees, to undertake a broad review of the compensation programs currently in place throughout AIG and to develop a comprehensive compensation program that applies to AIG as a whole.
I'm honored to serve with my colleagues, Mr. Feldberg and Mr. Foshee, in this important role. Mr. Foshee will now describe other aspects of our work, particularly with respect to the board of directors.
REP. TOWNS: Mr. Foshee, you're recognized for five minutes.
MR. FOSHEE: (Off mike) -- Ranking Member Issa, members of the committee, I'm Doug Foshee. I'll begin my testimony by providing you with some brief information on my background and experience.
I've spent 27 years in business. I was a banker in Texas for almost a decade, have been employed by two global companies and have served in leadership roles in so-called turnaround situations. I serve on the boards of two Fortune 500 companies and, as mentioned, serve as chair of the Houston branch of the Dallas Federal Reserve Bank.
Perhaps my most relevant experience as it relates to AIG, though, is my current full-time job as chairman and CEO of El Paso Corporation. I came to El Paso in the wake of a tumultuous time for the company -- stock prices falling precipitously, employees indicted and convicted, credit downgrades leading to cash collateral calls, and a trading company that included over 40,000 trades, inadequate risk management systems, more than one restated financial statement, rumored bankruptcy, a highly publicized proxy fight that forced the replacement of management and substantial change in the board, innumerable government investigations, and, tragically, the loss of morale of its long-time committed employees, most of whom had nothing to do with the decisions that led to the near-demise of this great 80- year-old company.
I joined El Paso in 2003 to try, along with a very committed and talented group of employees, to turn all this around. Since then, the team has divested over $17 billion in assets, reduced debt by half, returned our pipeline's investment-grade rating, and the company has been recognized by Fortune Magazine as one of its most admired companies in 2008.
The statistic we're most proud of, though, is that in our 2008 biennial employee survey, 91 percent of our employees said they're proud to work for our company, as relates to 41 percent in 2004.
I'm serving as a trustee simply because I believe that to whom much is given, much is expected. I feel a deep sense of obligation to the U.S. taxpayers to act as a good steward of the investment that has been made in AIG, and I'm honored to serve in this capacity with my two co-trustees.
One of our most important responsibilities as trustees is to ensure that AIG has an effective, independent and capable board, and that this board is focused on recruiting and maintaining a strong and effective management team dedicated to prosecuting the company's long- term plan. This allocation of responsibility between us, on the one hand, and the board and management, on the other, in addition to being set forth explicitly in the trust agreement, replicates what is the accepted standard for good corporate governance for public companies in America.
For these reasons, we've spent considerable effort focused on AIG's board of directors, how it functions, what skills the board members have, and how those skills fit with the needs of a company in AIG's extraordinary circumstances.
We've come to the conclusion that if AIG is to succeed, it needs a fresh start -- a reset, if you will -- a reset in the eyes of Congress, the American public and other important constituencies. We've recommended five new highly competent, highly capable, independent director candidates to the board. We expect that the board will approve those candidates soon, that their names will appear in the proxy statement that the company will be issuing within a week, and that they will be elected at the upcoming shareholders' meeting. These five additions, plus Mr. Dammerman, Ms. Nora Johnson and Mr. Liddy, and another new director proposed by the company, will give the company effectively nine new board members.
We believe that this action is wholly consistent with our overriding objective as trustees to maximize the long-term value of the equity held by the AIG Trust, and we look forward to supporting the newly constituted board as it carries out its tasks.
In closing, let me say that as trustees, we recognize there are many, many constituencies that have a perspective on, and in many cases a stake in, the outcome of AIG. Most of them wish it to succeed. Some do not. In the end, though, our focus is on maximizing the long-term value of the equity that the AIG Trust holds. It is through this lens that we see two constituencies to be of significant and underappreciated importance -- the customers of AIG and the employees of AIG.
If we all, as taxpayers, which to recover our investment in AIG, then everything begins with them. They watch TV and they read the newspapers. Every day, AIG's employees have a choice about where to work, and every day AIG's customers have a choice about where they buy their insurance and other financial products. If they don't choose AIG, then it is a mathematical certainty that the value of this asset that we now all own collectively a piece of will go down.
We need to keep these constituencies in mind when the rest of us -- the trustees and, respectfully, the Treasury Department, the New York Fed and the Congress -- decide how best to proceed.
Thank you, Mr. Chairman.
REP. TOWNS: Thank you.
And Mr. Verret, you're recognized for five minutes.
MR. VERRET: Chairman Towns, Ranking Member Issa and other distinguished members of the committee, I want to thank you for the opportunity to testify today.
My name is J.W. Verret. I am an assistant professor of law at George Mason Law School, also a senior scholar at the Mercatus Center Financial Markets Working Group. I also serve as the lead investigator for the Corporate Federalism Initiative, a network of scholars dedicated to studying the intersection of state and federal authority in corporate governance.
My focus today will be the trust document set up by the New York Federal Reserve Bank to manage the U.S. taxpayers' investment in AIG. Make no mistake, this document represents a grave risk to the American taxpayers' $180 billion in AIG.
I'm also concerned by the AIG Trust because of the precedent it sets. Secretary Geithner has announced his intention to create another trust to manage the Treasury's investment in Citigroup as well as other TARP participants.
If the AIG Trust, crafted during the secretary's tenure as president of the New York Fed, is used as a model for these new entities, the risk to taxpayers will be multiplied many times over.
My concerns are structural and in no way directed at the trustees themselves. By all accounts, they are professionals of the highest caliber, and their nation owes them a debt of gratitude for their generous service in this time of economic crisis.
Today my focus will be the three most troubling provisions at the AIG Trust. One requires the trustees to manage the trust in the best interest of the Treasury rather than the U.S. taxpayers specifically. Another offers generous protection against liability for the trustees. And a third permits the trustees to invest personally in investment opportunities that may otherwise belong to AIG.
The first dangerous provision is Section 3.03(a). That section defines the fiduciary duty of the trustees as being to manage the investment in AIG, quote, "in or not opposed to the best interests of the Treasury." In other financial entities tasked with managing wealth on behalf of others, the fiduciaries must manage that wealth to maximize the value for their beneficiaries. This is true for mutual fund trustees, ERISA retirement plan trustees, and boards of directors of publicly traded companies.
This provision threatens the entire purpose of the trust itself, which is to create an independent buffer between the short-term political interests of an administration and the long-term health of the nation's financial system. Maintaining this buffer between short- term political interests and long-term financial soundness is critical.
The economic evidence from around the globe is overwhelmingly clear: Political ownership in private banks and financial companies results in lower GDP growth, increased need for a subsequent government bailout, and politicized lending practices.
For instance, in Italy, banks with government ownership lend at lower rates in the south, since that area is politically important to the ruling coalition in Parliament. I am concerned about the temptation that we may someday see TARP banks and other financial companies encouraged to subsidize lending, for instance, in battleground states. This is why requiring the trustees to manage the trust in the best interest of the Treasury and not the U.S. taxpayer is so very dangerous.
A second provision in the trust that I find troubling is the corporate opportunity provision located in Section 3.05(b). Typically, fiduciaries are prohibited from stealing investment opportunities that they learn about through their performance as a fiduciary or trustee and using those opportunities for themselves.
The AIG Trust permits the AIG trustees to potentially secretly invest personally in investment opportunities they learn about through their performance as trustees without the necessity to even inform or seek permission from AIG or the Treasury or the Federal Reserve. This strikes me as unnecessary and particularly dangerous, given the potential for the AIG Trust to serve as a model for other similar documents.
A third threat to the American taxpayer located in this trust document are the indemnity and immunity provisions of Sections 3.03(a) and 3.03(d). These stand out as the most generous liability protections I have ever seen offered to managers of wealth and represent significant deviations from standard and best practices corporate governance.
Under no circumstances are public companies permitted to indemnify directors for bad faith actions or actions not in the best interest of their beneficiaries. AIG Trust has no such limitation on trustee indemnification. I am aware of no ERISA or mutual fund trustee or director of a public company granted such a generous immunity from liability to their beneficiaries as the AIG trustees are, in fact, afforded. And I can see no good reason why those best practices should not apply here.
In short, a trust in which the trustees cannot be held accountable by their beneficiaries isn't much of a trust at all. It is vital that when an organization manages wealth on behalf of others the ship's compass always point in the right direction, no matter who stands at the helm. For this reason, I am recommending that the flaws in this document be revised and, at very least, not repeated in future trusts set up by the Treasury.
I thank you for the opportunity to testify,and I look forward to answering your questions.
REP. : He finished exactly at five minutes, on the button.
REP. TOWNS: Thank you so much, professor.
Let me start this round of questions. Can I ask you, when is your next shareholders meeting, Mr. Foshee?
MR. FOSHEE: Yeah. The shareholders -- the shareholders meeting hasn't been set. It's expected that the company will file its preliminary proxy within about the next week. And following that, I believe within about 10 days a final proxy. And following that, a shareholders meeting, which I think we would expect would be toward the end of June.
REP. TOWNS: Are some of the items that will be discussed at this meeting include your executive compensation proposal and revamping the composition of the board?
MR. FOSHEE: Certainly, the five independent directors that we recommended to the board and the one new director that the company has recommended to the board will be the subject of a subsequent vote by the board of AIG. And we expect their names to be included in the preliminary proxy files within about a week.
REP. TOWNS: How about the executive compensation proposal?
MS. CONSIDINE: If I may address that, the executive compensation -- the letter that we sent requested the board and management and the relevant board committees to come up with a well-defined compensation program. That does not go before the shareholders, but in it we would want pay for performance; we would want to have an overarching compensation philosophy, reward of long-term -- focus on eliminating short-term risk that is rewarded; and also benchmarking the compensation packages that are going to be recommended to other companies that are in similar circumstances, size and complexity; and ask for periodic updates to the trustees so that we can track to make certain that we have a comprehensive, well-architected (sic) compensation program for all of AIG.
REP. TOWNS: Out of curiosity, what is the compensation of current or former board members? And is that in line with other corporations?
MS. CONSIDINE: Well, let me remark on that. Initially, the board members were paid in board fees, a retainer and also in shares. And I would say prior to the financial crisis were making between 2(00,000 dollars) and $300,000 a year per director. This year, the directors voted to decrease their compensation to $75,000.
REP. TOWNS: I see. Thank you.
MR. FOSHEE: I just would add, which is -- which is substantially less, probably less by more than half than the average Fortune 50 company, public company.
REP. TOWNS: Let me ask the three of you, how do you plan on voting on these matters? And are other issues up for a vote? I mean, on the -- on the item of the revamping the compensation or revamping the composition of the board, how do you -- Mr. Feldberg?
MR. FELDBERG: Essentially, that proposal is our proposal. I mean, we've been working very hard for the last month or two to put together this package of five new exceptional directors for the company. So we will be enthusiastically supporting that at the shareholders meeting.
REP. TOWNS: In your opinion, is AIG too big to fail?
MR. FELDBERG: If you -- if you go back to when the decision was made by the Federal Reserve and the Treasury that it was too big to fail -- I don't have all the information today that they had when they were making that decision. But if you ask me my best judgment as to what the situation was then, I would have said yes, it was too big to fail.
REP. TOWNS: Okay.
MR. FELDBERG: Now, whether it should have gotten to that point is a -- you know, is a totally different issue. But where things sat at the point that they -- that they felt they had to act, if I had still been in that seat, I think I would have been arguing the same case.
REP. TOWNS: As far as the trustee model that you all operate under, this is the first time that we can find that this model has been put in place by the U.S. government. What is your opinion of the trustee model? Is it a well-oiled machine or one that needs to be thoroughly revamped and revisited and, if so, how?
MR. FELDBERG: I think these are early days, and I would emphasize that. I would also say that we didn't have anything to do with the decision by the Fed and the Treasury to develop the trustee model. So, you know, it wasn't invented here.
I understand the problem that the Treasury and the Federal Reserve had that gave rise to their looking for a mechanism that would permit the stock to be voted in the best interests of the government but without the potential for conflict of interest. And I think this is a reasonable model to do it.
We've been working together as a team since the end of January and intensely since we got the stock. I think the three-trustee model and the way the trust authorizes the three trustees to proceed has so far been an exceptional model. It expects us to act through a consensus and to the maximum extent possible to act in unanimity. It does provide a mechanism so that if we cannot agree, two of the three trustees could go forward. To this point, I think I can say without hesitation that we have been able to talk things out and operate on every decision we've made. And there haven't been all that many, but every decision has been --
REP. TOWNS: Any other -- hate to cut you off -- any other panelists want to --
MS. CONSIDINE: Yeah, let me just take up on that, because, you know, we were involved in crafting the mission as it was reflected by the trust agreement. You know, we didn't set up the structure initially, but we really believe that it can work. We've been working with it. We've been working under it.
And we sometimes ask ourselves, what else -- what's the alternative? And perhaps, if you looked at it, the only alternative would have been direct government control, and that would have been nationalization, and that was not the intent of this. So we serve as the trustees. We're maximizing the value for the taxpayer. And we believe that it has functioned well and we're pleased with it so far.
REP. TOWNS: Thank you.
MR. FOSHEE: I just -- I feel some obligation to --
REP. TOWNS: You aren't compelled to answer, Mr. Foshee. If you want to, you can.
MR. FOSHEE: I just feel like we probably need to rebut some of the things that were said by my colleague to the left, because we disagree with him. The beneficiary of the trust is, in fact, not the U.S. Treasury Department; it is, in fact, the U.S. Treasury. Now, I'm not a lawyer, but as a layperson I can tell you what I believe. And I believe that that is the U.S. taxpayer.
Secondly, with regard to some ability to secretly take a business opportunity, there is, in fact, a provision in the trust that says that we cannot take a business opportunity away from AIG. But the fact is, we all have other jobs, and if I have an opportunity for El Paso Corporation, what the trust says is I don't have to share that business opportunity from El Paso with AIG, which I would think most people would think would be pretty reasonable.
And last, we would just respectfully disagree that the indemnification agreement provided in the trust is inappropriate and, in fact, it complies with Delaware law and many other states. And we're, as trustees, more than happy to put our reputation on risk in front of this committee and act on behalf of the U.S. taxpayers. We feel responsible to each other, in addition to the taxpayers and to all of you. And we thought and still believe that the indemnification provided was appropriate.
REP. TOWNS: Thank you. Mr. --
MR. VERRET: Mr. Chairman, if I may --
REP. TOWNS: Mr. Verret, I'm going to let you have some brief comments, though.
MR. VERRET: Thank you, Mr. Chairman.
REP. TOWNS: You may proceed.
MR. VERRET: First, with respect to the definition of what "Treasury" means in this document, unfortunately, it's particularly unclear. "Treasury Department" is a defined term, which in corporate legal drafting is something we do to make sure that every time we use a term in a document, the definition's consistent. So we put it in bold; we put it in parentheses; we highlight it as much as possible. So "Treasury Department" is defined as the U.S. Department of the Treasury. "Treasury," though, as mentioned in the applicable standard of care section is not a defined term. It's not in bold, and it's very vague about its definition.
Now, I think it is perfectly consistent to understand that that might mean the Treasury Department. That might also mean Treasury as in the general fund, in which case it still doesn't necessarily mean the same thing as maximizing shareholder value. Anything that might be good for the general fund or Treasury's expenses -- like if they want to do something discretionary, they can get AIG to fund it instead and -- (inaudible) -- on AIG's books could be in the best interest of the Treasury and the general fund but not in the best interest of maximizing the taxpayers' investment.
Secondly, with respect to the corporate opportunity provision, I would offer only quickly that it would permit them to take opportunities that would otherwise belong to AIG. It's crafted specifically that way.
And thirdly, just with respect to indemnification, as the former clerk for the Delaware Court of Chancery, I can offer my professional opinion with respect to Delaware law that this indemnification in here is not legal under Delaware law, not permitted by the Delaware General Corporation Law.
REP. TOWNS: All right. Thank you for that. And we are going to go to Mr. Kucinich. We're going to -- it's going to be a little lopsided for a minute.
REPRESENTATIVE DENNIS KUCINICH (D-OH): Thank you very much, Mr. Chairman.
Mr. Feldberg, how often do trustees meet?
MR. FELDBERG: (Off mike.)
REP. KUCINICH: And could you speak into the mike, please?
MR. FELDBERG: Yes. We have decided as a matter of discipline that we will meet at least once a week, and at least one of those meetings a month will be in person. So the absolute minimum has been a meeting a week.
REP. KUCINICH: So you meet telephonically, then, at least --
MR. FELDBERG: At least a telephonic meeting a week and one in- person meeting a month. However, that's the minimum. I would -- without having numbers -- hard numbers I can give you, I would say that we've probably met in person at least twice a month since we've been operating.
REP. KUCINICH: And you -- and with those -- are minutes kept of your meetings?
MR. FELDBERG: Yes.
REP. KUCINICH: Can you make available to this committee the minutes of your meetings?
MR. FELDBERG: Those minutes, under the terms of the trust agreement, I believe, are provided to the Federal Reserve Bank of New York, and I think are their property. I suspect that we'll --
REP. KUCINICH: So --
MR. FELDBERG: -- have to go the Federal Reserve Bank of New York to get them.
REP. KUCINICH: So the minutes of your meetings are not your property; they're the property of the Federal Reserve Bank of New York.
MR. FELDBERG: That may be a little strong.
REP. KUCINICH: Well, that's what you just said.
MR. FELDBERG: No, no. I know. And I may have been a little strong in saying that. But it is my understanding that the minutes belong to the Federal Reserve. I could probably use the advice of counsel to be sure I've got it right, because I don't want to mislead you.
REP. KUCINICH: Mr. Chairman, I think that in order to be able to evaluate the work of this -- of these trustees, I think it's imperative that this committee get the minutes of their meetings and get their phone logs so we can know what they talk about.
Now, Mr. Feldberg, when did you become a trustee?
MR. FELDBERG: When the trust agreement was first signed in January --
REP. KUCINICH: What was the date?
MR. FELDBERG: The specific date? January 16th of this year.
REP. KUCINICH: So you never had any discussions, then, with anybody at the New York Fed regarding the $8.5 billion in payments to Barclays as a counterparty?
MR. FELDBERG: Absolutely none, Mr. Congressman.
REP. KUCINICH: And do you -- so your decisions really are not transparent, then. We really don't know what you -- what you do as a trustee if we don't get -- if you can't produce minutes. And --
MR. FELDBERG: Well, I didn't say we can't produce minutes, sir. I said that I think we need to check with the Federal Reserve Bank of New York before committing to something.
REP. KUCINICH: Well, you worked for the Federal Reserve Bank of New York. Is that correct?
MR. FELDBERG: I did, yes.
REP. KUCINICH: And how long did you work for them?
MR. FELDBERG: Thirty-six years.
REP. KUCINICH: Okay. And were you asked by officials of the Federal Reserve Bank of New York to be a trustee?
MR. FELDBERG: Yes, I was.
REP. KUCINICH: Okay. And Ms. Considine, you worked for the -- you were a member of the board of the Federal Reserve Bank of New York. Is that correct?
MS. CONSIDINE: That's correct.
REP. KUCINICH: And were you asked by the Federal Reserve Bank of New York to be a trustee?
MS. CONSIDINE: Yes, I was.
REP. KUCINICH: And who made that request of you?
MS. CONSIDINE: Tom Baxter, who was the General Counsel.
REP. KUCINICH: And Mr. Feldberg?
MR. FELDBERG: The same, Tom Baxter.
REP. KUCINICH: And do you report to the Federal Reserve Bank of New York on a regular basis?
MR. FELDBERG: I would say that we have conversations with the Federal Reserve Bank of New York on a --
REP. KUCINICH: On a regular basis?
MR. FELDBERG: On a regular basis. I would not characterize it as our reporting to them. It is really a vehicle for us exchanging views and information and analysis. It's a two -- very much a two-way street.
REP. KUCINICH: Isn't it true that Section 4.01 of the trust agreement calls for the trustees to provide the New York Fed with monthly custodial reports, a quarterly summary of significant actions, a quarterly report summarizing the efforts and activities that affect the sale or distribution of trust stock or other trust assets, minutes of any meeting, divestiture plan as amended time to time by the trustees? Isn't that true?
MR. FELDBERG: Yes.
REP. KUCINICH: So, would it -- would it be fair to assume that the Federal Reserve Bank of New York has a significant role in monitoring the work of the trustees?
MR. FELDBERG: I would say that they --
REP. KUCINICH: Are you --
MR. FELDBERG: -- have a significant interest in what we --
REP. KUCINICH: Are you trustees on behalf of the Federal Reserve Bank or are you trustees on behalf of the U.S. Treasury?
MR. FOSHEE: We're trustees on behalf of the trust --
MR. FELDBERG: Yes.
MR. FOSHEE: -- that holds the 79 percent equity on behalf of the U.S. Treasury.
REP. KUCINICH: And then can you explain to this committee, then, why do you -- why do you respond to the Fed? Why does it -- why is this trust agreement structured so that your accountability is to the Fed?
MS. CONSIDINE: I don't -- I don't think that's the reading that I would give to it, because, number one, in terms of the visibility of our responsibility, our responsibility is to act as the shareholder and that is to vote the shares. Now, when the annual meeting occurs with AIG, we will be voting for the trust -- the directors. We have a trust with the directors. We will vote for the auditors and we will vote for any other proposals that are coming before the shareholders. That will be absolutely open to the public.
As part of the agreement, yes, we are to provide minutes and, of course, (expenses ?) back to the Fed. But we were selected to be totally independent trustees, and I believe that's the way we function.
REP. KUCINICH: Mr. Chairman, my time's expired. I'm going to need to ask questions along these lines, if I may, as a follow-up. Thank you, Mr. Chairman.
REP. TOWNS: Delighted.
Recognize the gentleman from California, Mr. Issa.
REPRESENTATIVE DARRELL ISSA (R-CA): I want to thank you all for being here and I want to thank you for service. And as I said to most of you -- two of you beforehand, this committee is not questioning your honesty and your effort to live under the trust agreement you've been given, which, Mr. Feldberg, you made very clear -- you didn't draw it up. This -- you know, this is sort of the job you got hired for and the conditions of the job were already set.
And I think it's important that the public understand that, that if there were mistakes made or if we are sending you in the wrong direction, it is not because you made that determination. And since your contract was signed -- the trust was created on the 16th of January, then the previous president was still in place and the previous secretary of the Treasury was still in place. So we'll accept for a moment that this is a two-administration decision.
I'm going to go to Mr. Verret first. And specifically about the new administration, President Obama has said that he believes that we should -- thank you -- that we should actually have the Iraq and Afghan wars on the books. He thinks that that should be part of the national debt. The various TARP injections and particularly the guarantees totaling trillions of dollars -- what would be the effect if we put -- should we put those onto the national debt since they're obligations of the federal government? And what would be the effect?
MR. VERRET: Well, I can tell you the effect of when the United Kingdom took -- bailed out its two largest banks, when it bailed out Royal Bank of Scotland and Lloyd's. They put that $2.1 trillion of debt on those banks' private bank budgets onto the national budget. I think this was a consistent decision by Chancellor Darling that under the accounting rules -- the government accounting or private accounting, when you control an entity and you back up an entity, you're responsible for their debts and you need consolidate their debt onto your books.
So when Chancellor Darling consolidated the debt of those two banks onto the U.K.'s national debt, the U.K.'s national debt doubled. It literally doubled overnight.
And if we were to put Citigroup, for instance, debt onto the national debt, which I think would be appropriate, because we now own a controlling stake -- a 32 percent controlling stake in Citigroup, which, even under the Treasury Department's own regulations about reviewing foreign investments in the United States is defined specifically as control -- they define it -- control as 10 percent. We've got 36 percent. Under Delaware's corporate law, that's control; under securities laws, that's control. So we, I think, to be consistent should put Citigroup's national debt -- Citigroup's private bank debt onto our national debt. That would, I think, increase -- by a back-of-the-envelope calculation -- it would increase our national debt by about 15 percent, just Citigroup alone. Other TARP participants, the national debt would increase by significantly more.
So right now, it's effectively sort of a shadow national debt that we have, unrecognized.
REP. ISSA: Okay. I appreciate that. And I'll -- I may send a reminder to the president that he supported that.
Ms. Considine, I'm going to ask you, but the others are free to answer, my understanding is that you represent -- you three are, for all practical purposes, the stockholders for 79.9 percent of the company and you act as prudent stockholders should act in your day-to- day business. That's your charge, when we get past the legal contract. Is that right?
MS. CONSIDINE: That's correct.
REP. ISSA: So, regardless of whether it's the Treasury or the treasurer or whoever, do you believe that your job is to maximize the stockholder value on behalf of whoever the owner is?
MS. CONSIDINE: Absolutely. Absolutely.
REP. ISSA: You're all saying yes.
MR. FOSHEE: Yes.
MR. FELDBERG: Yes. I hope I made that clear in my --
REP. ISSA: Okay. And what's important to me to go down this road is any -- well, first of all, the New York Times has said that if they don't like what you're doing, the Fed will fire you. Do you believe you can be fired by the Fed, even though you're maximizing the stockholder value?
MR. FELDBERG: I think the Fed can remove us for cause.
REP. ISSA: Okay. Well, let's go down that for a second. The Fed is sitting there with tens of billions of dollars that it's owed on the other side of the ledger. But if, as stockholders, you want to maximize stockholder value, wouldn't you consider doing, through your board, through the operation from Mr. Liddy, consider doing a lot of things that maximize value, for example, spinning off the healthy companies into new public companies in which you would have an 80 percent share, and that public -- that stock would trade unimpaired and immediately rise to its fair value and determine that the debt that Treasury put on belongs to the corpus in London, not to the corporation that you're spinning off, and, as a result, leave it where it would be. Now, wouldn't that be a prudent thing for the board to do on behalf of this money that Mr. Liddy admitted was injected by the Treasury and given to other companies, including ones overseas, because of factors outside the best interests directly of the company?
So as stockholders, are you free to do that? Can you do that even though, in fact, you probably would be increasing stockholder value here and Treasury may not like it, because they'd have to admit that what they did was -- well, the term is "urinate" I guess, we don't say the other word anymore -- a whole bunch of the taxpayers' dollars into foreign banks and other corporations that have slid right out of your company -- one division of your company which you did not have an obligation to pay, but they gave you the money and you paid it out anyway.
A complex question, yes.
MR. FOSHEE: Congressman Issa, if I could answer that question, I think that you just articulated the primary reason that there is a trust, because the Treasury and the Federal Reserve Bank of New York couldn't be effectively --
REP. ISSA: It couldn't be both --
MR. FOSHEE: -- a good lender, regulator and equity holder. And so the very thing thing that you're talking about, which is a lender wanting the company to take an act which is not in the best interests of the shareholders, especially to the extent that that act required a shareholder vote, is exactly why the three of us are sitting here in front of you today. And our responsibility would be to act in the long-term best interests of the shareholders.
REP. ISSA: Okay, now, I'll let you all answer if the chairman will indulge me, but the other two parts of the question were: Are those other acts which would maximize the value which are available to you today at your disposal? And would all of those acts be outside what you could be fired for, since they may very much leave this corpus with a negative balance while, in fact, maximizing stockholder value?
MS. CONSIDINE: They would be outside of what we would be fired for.
REP. ISSA: So you could do that, if it's determined to be -- to maximize the value for the company and stockholders, as -- in working with your board.
MS. CONSIDINE: Well, I think there's -- there's two issues. Number one, the cause for which we could be fired, and number two, what is the roles, responsibilities and limitations of the trust? And I think it's something that we have to think about. And as we said, this is uncharted waters, because we need to respect corporate governance. We need to respect the role of the board of directors, who are duly elected by the shareholders. But that's the balance that we have here. You've got the debt holders on one side, the equity holders on the other, maximizing long-term value versus trying to get repaid for loans that have been made. And that's why I think this trust is such a unique instrument, but is probably perfectly tailored to the situation in which we've found ourselves.
REP. ISSA: Okay. And Mr. Verret wanted to answer, briefly.
MR. VERRET: I just wanted to briefly add -- just to cite the Section 2.04 D, if that's useful to the discussion. It says clearly here that in exercising their discretion with respect to the trust, the trustees are advised that it is the Federal Reserve Bank of New York's view that, quote, "the company being managed in a manner that would not disrupt financial market conditions is consistent with maximizing the value of the stock," even though maybe technically that might not be the case. So it seems like they are afforded discretion, at least as I read the trust, to do things consistent with helping general market conditions, even though it might not maximize the value of the stock.
MR. FELDBERG: I believe that clause was put in by the Federal Reserve to express their desire that that issue be considered in the course of the -- in the course of the trustees' deliberations. It was explicitly done in a way that it does not direct the trustees to do anything.
REP. ISSA: So none of you feel bound by that provision, if, in fact -- if you have to choose between stockholder value --
MR. FELDBERG: No.
REP. ISSA: -- and, quote "disruption" of some market.
MR. FOSHEE: We feel bound to consider that, but we don't feel bound to follow that, no.
REP. ISSA: Thank you, Mr. Chairman.
REP. : Thank you very much. Let me just take my round. First of all, let me thank you for being here. And let me just make certain -- it's my understanding U.S. trustees are responsible for overseeing the federal investment in AIG. Is that correct?
MR. FOSHEE: We're -- just to be clear, we're responsible for overseeing the equity held by the shareholders -- the shares held by the trust.
REP. : Right. I would like to provide a copy -- in view of -- do you have a -- let me put it this way: Do you have a plan?
MS. CONSIDINE: I think you're probably discussing the plan -- the disposition plan that we're responsible for putting together.
REP. : Yes. Are you -- are you involved in Project Destiny?
MS. CONSIDINE: Oh, no. No. No.
REP. : You're not involved in that at all?
MR. FOSHEE: Well --
MS. CONSIDINE: We have looked at Project Destiny. We discussed it with the senior staff at AIG. We've given some comments. We've seen it on the high level, in terms of the plan.
REP. : Right.
MR. FELDBERG: If I might add, I think that plan is a good example of the intersections between management, the trustees and the Treasury and the Fed.
The plan which Mr. Liddy talked about earlier today is AIG's plan, but in order to implement the plan, it will require a buy-in by the Treasury and the Federal Reserve. And, you know, it could conceivably involve a change in or an increase in the financing provided by the Treasury and the Federal Reserve to AIG.
REP. : Let me --
MR. FELDBERG: The role --
REP. : Go ahead.
MR. FELDBERG: The role of the trustees, in connection with that plan, has been to provide our business judgment and experience in reviewing the plan and telling the Treasury and the Fed where we think the plan could be enhanced if we saw areas where that was possible. In fact, we have given them positive input in a number of areas in connection with the analysis and review of the plan. But at the end of the day, it's AIG's plan and it will only go into effect if the Federal Reserve and the Treasury buy into it. At least that's my understanding.
REP. : Let me ask you this, then. What do you - what is your views on Project Destiny? What do you think of it?
MS. CONSIDINE: Let me start off. I think it's a workable plan. There are issues that need to be addressed, in terms of the timing of the plan.
And also, the timing has to do with many of the risks that are out there in terms of the economy, the capital markets and the ability to dispose or get financing for the disposition of these assets.
MR. FOSHEE: Yeah. I think based on what we've seen, Chairman, the plan makes sense. I think one of the challenges that AIG faces is you don't want in this kind of a market to go take these sort of crown jewel assets and sell them in a market where there aren't capital markets for buyers to pay full value.
The other problem, of course, is that the AIG brand has been damaged. And I think the company views, and we would concur, that taking these -- the three, in particular, the three large insurance assets and making those separate public entities does a number of things.
The first thing it does, of course, is get them out from under the negative halo of the AIG brand. It also reenergizes the employees of those companies, because they now feel like they have a future with a brand new, very large public company at some point.
And then I think the third thing, as a practical matter, is to the extent there are entities out there that would want to acquire and insurance company or something like that, it creates a certain amount of valuation that is apparent by issuing it in the public market.
REP. TOWNS: All right.
MS. CONSIDINE: And I think -- just to follow up on that -- that was one of the reasons that we, as trustees, sent the letter in terms of having a comprehensive compensation philosophy and plan there, because if you're going to be having different companies, you're going to need management out there. And they need the ability to attract and retain people to come in and be able to manage these and get them into the shapes that they are going to be able to maximum the value when they're disposed of either through sale or an IPO.
REP. TOWNS: AIG has received billions in tax dollars, but continues to post losses with the largest in history -- over 60 billion (dollars) posted just two months ago.
What can we do to sort of turn this around? Have you made suggestions or recommendations to them or do you just sort of like say, look, that's the way it is and that's what's going to happen? What is your role in trying to turn this around -- or do you have a role in it?
MR. FOSHEE: Well, I think one of things that -- one of the most prominent roles that I believe we can play as trustees is ensuring that AIG has the best, most qualified independent board of directors that it can have overseeing the management team, and ensuring that there's a management team there that is properly motivated and can execute the plan.
So I think one of our primary tasks, we feel good about the successes we've had in being able to attract those kind of people to come be the board members of AIG. And it is that group -- the board and the management team -- that have the responsibility for directing this company and getting it through this mess.
I think our input -- I believe that it's valued by the company and by the Federal Reserve to the extent we have conversations with them. And so I do we're playing an active role in that.
REP. TOWNS: Okay.
Do you have a plan that you submitted to AIG? I know you get together -- you indicated that -- but did you submit a plan as group saying you think this is something that should happen or this is something that we should move forward and that maybe instead of three to five years giving the taxpayers their money back, we can do it in a shorter period of time?
Do you have a plan -- anything on paper -- that you can give us?
MR. FOSHEE: No. In fact, the trust doesn't charge us with creating a plan, other than for the disposition -- the ultimate disposition of the shares of AIG that we are entrusted to be stewards of.
And we would expect, as we sit there today, that that's probably years away in terms of maximizing the shareholder value.
MS. CONSIDINE: Yeah. And we can't dispose of those shares until the loan that was extended by the Federal Reserve Bank of New York is repaid. Now, that doesn't mean we're going to wait until the re-payal to come up with a plan, but I think it's a little premature to be working on a plan for disposition of the shares that we hold at this time.
MR. FOSHEE: And it really isn't our role to create nor could we -- the three of us; this is one of the largest companies in the world -- create our own plan for what AIG should do with its business.
What we do do, though, is we talk to the company's management team, the company's outside advisers, their outside auditor, head of internal audit, the Federal Reserve and its outside advisers and develop our own business judgments so that we can react to plans that are presented by the company.
REP. TOWNS: You know, I'm just thinking that if you are trustees of a company that has set a record in losses, it seems to me you should have something to say -- should put something somewhere. I mean, if not, you should feel extremely guilty.
Because the point is that they've set a record -- posted in the last two months -- that shows that they're losses. And so I mean, it seems to me that based on your background and you being involved in business and of course -- that you should be able to say to them, we need to move in a different direction. Let's try this.
I mean, I would like to see something on paper that you've given them as a suggestion or recommendation, knowing that it's not your final decision, but my God! I mean, this kind of loss -- somebody ought to say something and somebody ought to do something!
MR. FELDBERG: As I think has been said, there is a plan. In the first instance, it was put forward by AIG. It's a massive document. I mean, the number of man-hours that have gone into its preparation --
REP. TOWNS: Are you referring to the Project Destiny?
MR. FOSHEE: Yes.
MR. FELDBERG: Yeah. I'm referring to Project Destiny.
And that plan has been submitted to the Federal Reserve and the Treasury for their review and buy in. And the role we have played is to have access to the plan and an opportunity to provide our input. And we have done that informally in discussions with both AIG and the Federal Reserve and the Treasury. And those discussions are ongoing.
REP. TOWNS: So there's no input in writing. You've haven't written anything down?
MR. FELDBERG: Mr. Chairman, at the moment, we are basically a staff of three -- the three trustees. We have opted not to hire our own analytical resources, not to engage outside consultants -- investment bankers or whatever -- to assist us. There may be a point in the future where we will decide to do that. And certainly, when we get to the point of having to come up with a plan for the disposition of the stock we will do that.
But at this point, we have a law firm advising us to make sure that we comply with all the legal requirements of the trust and anything else that's relevant. And we've got somebody to help us deal with the press. But that basically is it. And there are the three of us.
And what we are trying to do is provide, from the top down, our business judgment and experience in reviewing the plans that have been put together.
MS. CONSIDINE: I think in this case, leverage is good. We are trying to leverage the board, the management, the outside firms that they are using -- be they investment banks, auditors, internal auditors and all the resources -- and bringing that together and then coming in and offer, based on our collective business judgment, feedback and comment.
MR. FOSHEE: Yeah. I think our business judgment is that, frankly, the last thing AIG needs now is another set of outside advisers. The company has internal staff, it has external advisers. The Federal Reserve Bank has internal staff; it has outside advisers.
We've chosen, rather than to spend the taxpayers dollars on another set of investment bankers at this point not to do that and leverage already exists.
But we have -- I think we have had a significant amount of input into the direction of the company. And I would say not only are we not embarrassed, we're proud that from a standing start at the beginning of March we're able to announce to you today that we've put forward five really capable, really independent directors that we expect to be elected at the shareholders in now close to a month away.
Because we know if AIG has the best board it can get and that board is directing the best management team it could get, therefore you're going to end up with the best outcome you can have for the U.S. taxpayer.
REP. TOWNS: Well, thank you very much.
I yield to Congressman Tierney from Massachusetts.
REP. JOHN TIERNEY (D-MA): Thank you, Mr. Chairman.
Do your minutes reflect conversations you've had amongst yourselves about Project Destiny?
MR. FOSHEE: To the extent it was during a trustee meeting, I think the answer to that would be yes; although, I haven't gone back and reviewed all of the --
REP. TIERNEY: Are you having conversations amongst yourselves about Project Destiny on occasions when you would not term it a trustee meeting?
MS. CONSIDINE: I think we've had the conversations on Project Destiny when it's been with the AIG management; with AIG management and the Fed; and AIG management, the Fed and Treasury.
REP. TIERNEY: Do your minutes reflect those conversations and dialogues with those individual?
MS. CONSIDINE: Well, they wouldn't be the minutes of the trustees. They would be the group conversation.
REP. TIERNEY: So there is no record, in other words, of the trustees of dialogues that they've had with third parties on the issue of Project Destiny.
MS. CONSIDINE: Project Destiny.
REP. TIERNEY: You don't go back and make a report or keep any record of what conversations you had or whatever?
MR. FOSHEE: Probably not.
MS. CONSIDINE: These are real working sessions.
REP. TIERNEY: What is the value of the stocks that you hold right now? Best estimate?
MR. FOSHEE: I don't think a reasonable person could tell you the answer to that question, given the nature of the complexities that are in front of AIG.
I think it is our business judgment that the plan that's been put forth offers up a very credible, very rational way for the U.S. taxpayer to get its money -- get their money back.
REP. TIERNEY: You wouldn't just take the number of shares you have and multiple it by the dollar-per-share cost of the market?
MS. CONSIDINE: Well, I mean, that's what I was going to say. If you want to say 80 percent of what the share price -- between 5 and 6 billion (dollars) -- so it's 4.8 billion (dollars). I mean, if you're looking for -- whether that's real!
MR. FOSHEE: Whether that's the long-term value of the shares is --
MS. CONSIDINE: At the present value.
REP. TIERNEY: Now, there is conversation that this Project Destiny really looks like a way of selling off bad assets, of restructuring and selling profitable units in an attempt to wind down the company. There are some people that believe that's what's going on here.
Is that your impression? And if it is, are we just looking at bankruptcy by another name?
MS. CONSIDINE: Well, I would say it's looking to sell off good assets and there are some very, very valuable assets within the AIG umbrella -- the insurance assets. And I believe, as Mr. Libby talked about, ALICO, AIU, and AIA are three of sort of the gems that are being looked at.
Part of the plan is to, you know, continue the wind down of the financial products division. So I think what you'd be left with is a much smaller AIG, reconstituted -- which would probably be, in some respects, almost an investment company that would be holding the shares in these other companies until they were finally disposed of -- whether a total sale, an IPO or if only portions of it were sold.
REP. TIERNEY: Couldn't we have kept $185 billion in the Treasury and just gone right to that by having a bankruptcy proceeding at the very outset of this?
MR. FELDBERG: You probably could have, but that gets into the question of systemic risk and what would the implications of that have been more broadly.
MS. CONSIDINE: You know, I was just on another panel last night. And when you think back of what was going on that weekend of September 13th this fall when you had Merrill Lynch and you had Lehman Brothers and then, you know, within 24 hours you had an issue with AIG, I think the impact would have been beyond what we could even imagine even after what we've all seen.
So I think, you know, maybe 20 years from now academics can look at it and really have some time and some distance. But I think acting within that 48-hour time span, what was done was probably the thing that had to be done, given the systemic consequences that were out there.
REP. TIERNEY: You're familiar with BlackRock's contract with the Fed?
MS. CONSIDINE: Familiar with it, yeah.
REP. TIERNEY: I'm sorry?
MR. FELDBERG: We're aware of it.
REP. TIERNEY: Does that impact your role at all? I mean, they've actually been sort of charged with the oversight and monitoring of what's going on within the company. Does that impact or do you get in touch with them at all and share notes?
MR. FOSHEE: We have not had conversations either with BlackRock or, I believe Blackstone, who is also an advisory to the company or to the Fed.
I think our view is that so far as we know, those are good things, not bad things. Because as everyone knows, the financial products group has been under a tremendous amount of stress, still represents a tremendous amount of exposure to the company. And having another set of eyes in there to assist we would view, on its face, as a good thing from the perspective of protecting the taxpayers interest.
REP. TOWNS: Would the gentleman yield at this time?
We have a vote on and I would like to move to Congresswoman Marcy Kaptur and then we will be able to conclude.
Congresswoman Kaptur.
REP. MARCY KAPTUR (D-OH): Thank you, Mr. Chairman.
Mr. Foshee, who is El Paso Corporation's chief banker?
MR. FOSHEE: El Paso Corporations chief banker? We have relationships with half a dozen of the top -- of the largest financial institutions in the world.
REP. KAPTUR: And they would be?
MR. FOSHEE: Bank of America, JP Morgan, Deutsche Bank, Goldman Sachs -- I'm going to get in trouble for leaving them out by them -- Royal Bank of Scotland -- a whole litany of banks around the world that are service providers to El Paso.
REP. KAPTUR: And also many of which -- most of which have gotten counterparty funds through the AIG transactions through the Fed. You would agree to that?
MR. FOSHEE: You know, again, specifically, I'm sure that many of them did, because we do business with many of the banks around the world.
REP. KAPTUR: Well, JP Morgan Chase got 1.6 billion (dollars); Bank of America got 12 billion (dollars); Citigroup got 2.3 billion (dollars) -- interesting to look down the list.
Let me ask you: When you served as CEO of Halliburton, were you a party to the no-bid contracts that were initiated at the beginning of the Iraq war for the oil security in Iraq?
MR. FOSHEE: First of all, I was never CEO of Halliburton. I worked for Halliburton for 24 months. I was hired on the heels of the asbestos crisis as the chief financial officer in what would have been characterized as a turnaround mode when the stock when from $56 to $6.
Of the 24 months I was there, I spent most of that time as the chief financial officer, so I would not have a role in that.
REP. KAPTUR: All right. This says chief operating officer and the executive vice president.
MR. FOSHEE: Yes. In the last six months I was with the company I was the chief operating officer.
REP. KAPTUR: All right. Through what years -- through 2003?
MR. FOSHEE: That would have been -- I believe I left in the early to middle 2003 -- so the last six months.
REP. KAPTUR: All right. You would have been there at the beginning of the Iraq war.
MR. FOSHEE: Yes.
REP. KAPTUR: All right. Thank you very much.
Mr. Feldberg and Ms. Considine, when people with to write you in your position as trustees, to which address do they write you?
MS. CONSIDINE: 399 Park Avenue, New York, New York. And the zip is 10022.
REP. KAPTUR: All right. And how do they address that?
MS. CONSIDINE: Care of Arnold and Porter. That's our -- we have a trust office at Arnold and Porter at 399 Park.
REP. KAPTUR: All right.
Mr. Feldberg, through 2008, you were chairman of Barclays Americas, is that right?
MR. FELDBERG: Yes.
REP. KAPTUR: Okay. Do you own stock in that bank?
MR. FELDBERG: Yes, I do.
REP. KAPTUR: You do. What is the relationship between that and Barclay Capital that was in receipt of $8.5 billion through the AIG counterparty arrangement with the Fed?
MR. FELDBERG: Barclays Capital is a business unit of Barclays Bank.
REP. KAPTUR: So they are related.
MR. FELDBERG: They are related, yes.
REP. KAPTUR: All right. When you worked at the Fed, what did you do? You were a senior official. What did you do?
MR. FELDBERG: Well, I did a number of different things.
REP. KAPTUR: What was your title?
MR. FELDBERG: Executive vice president at the time I retired.
REP. KAPTUR: All right.
MR. FELDBERG: I spent about 10 years running the discount window -- the Fed's lending operation. And the last nine years I was there, I was executive vice president responsible for bank supervision.
REP. KAPTUR: Thank you.
And where's Barclays that you worked for headquartered in our country?
MR. FELDBERG: In New York City.
REP. KAPTUR: In what street?
MR. FELDBERG: Well, it's moved, but at the time it was 200 -- well, when I left, it was 200 Park Avenue.
REP. KAPTUR: Park Avenue. So you're close neighbors there.
And Ms. Considine, I wanted to ask you: Butterfield Fulcrum is a hedge fund management industry. Who are your major clients?
MS. CONSIDINE: Mainly hedge funds such as -- well, very small ones that wouldn't be on our radar screen.
REP. KAPTUR: Can you provide those for the record, please? Just pick one, pick two, pick three -- you must know who your clients are.
MS. CONSIDINE: Yes, I am. The thing is, we are a private company and we usually don't come out with our clients names. So I would just have to check with it.
The other thing is it's not a U.S. company. So I would just like to go and get clearance on that.
REP. KAPTUR: Butterfield Fulcrum?
MS. CONSIDINE: Butterfield Fulcrum.
REP. KAPTUR: It is based in what country then?
MS. CONSIDINE: It's a Bermuda company. It was founded 20 years ago in Bermuda. It was bought out about two years ago by a U.K. company. And then in the past year, we merged with the arm of Butterfield Bank, which is a 150-year-old Bermuda bank.
Do it's a global company. It is incorporated in Bermuda. Its senior management is located in the U.K.
REP. KAPTUR: All right. I thank you for stating that.
Mr. Chairman, my time is expired.
REP. TOWNS: Yeah. We have a vote on. So we have three votes on so I hope we'll be able to make it.
But let me just say that --
REP. KAPTUR: Mr. Chairman, let me just say, you know, as I've listened today, I get more and more concerned when I represent a part of our country that is being devastated by what these New York institutions and New York headquartered institutions have done to America and have done to places I represent.
You have no conceivable idea of the damage you have done and are doing! I could go into a lot of detail here and I know, Mr. Chairman, we'll have a follow-up hearing.
The way this whole thing is structured, it's an inside deal from the beginning. Every single witness we've had is headquartered in one place. You all know one another. You work together all the time and I'll tell you: What you've done to Middle America is a sacrilege.
MR. FOSHEE: For the record, I'm from Texas. Our headquarters are in Texas.
REP. KAPTUR: Oh, but your bankers aren't! They follow right up to the street.
REP. TOWNS: Yeah. Let me -- you know, it's not clear to me and other members here exactly what you do in terms of your role that you're playing in this.
So if you'd be kind enough to submit to the committee some minutes of your meetings so we can get a feel for what you're doing. Because it's not clear to us up here and we've been sort of like whispering to ourselves and passing notes to ourselves about your real role. And so if you could help us with that, I'll hold the record open for some minutes to sort of get a feel for what you're doing. And maybe we'll understand why you're doing it.
Thank you so much. Really appreciate your coming today. (Sounds gavel.) Committee adjourned. (Sounds gavel.)
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