$38 Billion
That Monday, Sept. 22, Morgan Stanley owed the Fed $38 billion, $1 billion more than AIG had drawn down from its government loan, according to documents introduced by Boies.
Baxter took the witness stand late yesterday following more than 13 hours of testimony by Scott Alvarez, the Fed’s general counsel.
Alvarez defended the interest rate that the Fed set for the AIG bailout loan, saying it was meant in part to prevent shareholders from reaping a “windfall” from a company that was headed for bankruptcy without a government rescue.
The loan rate chosen by the Fed came from a rescue proposal involving Goldman and JPMorgan Chase, according to Alvarez.
While the figure wasn’t mentioned in yesterday’s testimony, the rate the Fed charged AIG was 14 percent, more than three times higher than it charged other struggling financial institutions, according to Starr’s filing.
AIG Terms
Alvarez testified that the terms set by AIG enabled the Fed to achieve its goals of helping AIG remain in business and preventing further disruption of markets.
“Both of those objectives would have been accomplished if the interest rate was half what was charged AIG, correct, sir?” Boies asked Alvarez.
“Possibly,” Alvarez responded.