AIG and Barclays

Two bits of important company news today.

AIG

There has been a HUGE amount of press coverage yesterday and today since AIG disclosed recipients of payments after the US government bailout last year.  Some $43 billion was moved to securities lending counterparties to satisfy collateral obligations.  The outrage has been stoked by various media reports suggesting that somehow these payments were inappropriate.  I have even read stories where reporters were railing against the fact that some of these collateral payments were made to “foreign” (meaning “non-US”) banks like Barclays, Deutsche Bank and BNP Paribas (the three biggest disclosed recipients).  You can see the list here.

I guess all of those reporters and commentators would rather have had AIG go into default and the bailout money going to lawyers rather than to continue to support AIG’s ongoing operations.  I assumed that the idea of the bailout was to assist AIG in carrying on its business.  Silly me.

Barclays

Barclays has been working hard for months to try and ensure it avoids UK government money.  My guess is that they feel that once a bank is beholding to the government, things change, and they aren’t necessarily good changes.  (As far as I am concerned, other than protecting depositors’ cash, I can’t see any useful government ownership of the banking business.)

This weekend and through today it has been reported that Barclays was in discussions regarding the possible sale of its ETF business – iShares.  The possible sale proceeds have been quoted as anywhere between £3 and £6 billion.  iShares is the leading brand name in the business and ETFs as a product continue to grow in importance as a path to investment for institutions and retail investors alike.

ETFs are also ideal from a securities lending point of view, and iShares is a key part of the Barclays Global Investors lending programme.  If Barclays sells iShares, what will the impact be for BGI’s lending?  Don’t underestimate the importance of iShares to their programme, but BGI was a top tier lender before the dramatic growth of the iShares franchise, and there is no reason to think that would change without it.  In any case, no doubt part of the discussion would involve BGI continuing a third party lending relationship for any buyer.

P.S. Spitalfields Forum tomorrow, so don’t know if I will be posting, but you can follow Len Welter who will be Twittering the conference.  And maybe I’ll throw in a comment or two of my own!