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Case 2:11-cv-10549-MRP-MAN Document 254-1 Filed 03/28/13 Page 1 of 35 Page ID #:16590

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Deposition Testimony of Christopher J. Swift March 21, 2013

Christopher Swift was the lead businessperson acting for AIG on Maiden Lane II.

• “A. In the fall of 2008, I was the CFO of the Life and Retirement Services Business Unit.” 10:3–5.

• “Q. You were involved with the Maiden Lane II transaction, correct? A. Yes. Q. Could you describe for me your role in connection with that transaction? A. I was, I would say, the principal business person quarterback to find the solution. Q. A solution to the securities lending program? A. Yes. The mission was to wind it down.” 35:14–25.

• “Q. So, you were involved in negotiations over Maiden Lane II with the Fed, correct? A. Correct.” 42:4–7.

• “Q. So, you said that―in response to one of Mr. Fry’s questions, that you were the principal business person, the quarterback to find a solution to securities lending. Do you recall that? A. Yes. Q. Were you also the principal business person, the quarterback, in negotiating the Maiden Lane II transaction? A. Yes.” 74:12–21.

• “Q. And from your perspective as the chief negotiator for AIG, who were the primary negotiators on the Fed side of the table? A. I would say I interacted with two on a principal basis: Jim Mahoney on a daily basis, and Steve Manzari on a two-, three-times-a-week basis during this time. So, those would be the two principal ones.” 75:7–15.

Swift testified that he had no discussions with anyone about transferring AIG’s fraud claims.

• “Q. During that time period, did you ever discuss with anyone the question whether or not AIG would be transferring litigation claims to Maiden Lane II? A. No, I did not discuss it with anyone. Q. You didn’t discuss it with anyone at AIG? A. True. Q. You didn’t discuss it with anyone from the Fed? A. True. Q. You didn’t discuss it with any lawyers for the Fed? A. Correct. Q. You didn’t discuss it with any lawyers for AIG? A. Correct.” 58:6–23.

• “Q. During the time period from when you first heard of what became the Maiden Lane II solution, until the time that the Asset Purchase Agreement was signed, did you have any written communications with anyone concerning the question whether AIG would be transferring litigation claims to Maiden Lane II? A. I don’t―I don’t recall having written communication dealing with claims in litigation at all. Q. And would your answer to that question be the same if I referred to transferring litigation claims to the Federal Reserve? A. Yes.” 59:4–19.

• “Q. And with respect to discussions, is it correct that you did not have any discussions with anyone during that period concerning the question whether AIG would be transferring litigation claims to the Federal Reserve Bank of New York? A. Correct. I don’t recall talking about claims in litigation and―at all with the Fed.” 59:20–60:4.

• “Q. What was the asset that comprised the bulk sale, from your perspective as the lead negotiator for AIG? A. $40 billion of par value of RMBS securities. Q. Did you believe that that asset included fraud claims? A. No. As we said, we’ve talked about a

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lot of things, we negotiated a lot of things; we did not negotiate a transfer price of terms and conditions for transferring fraud claims.” 76:25–77:12.

• “Q. Now, I want to take you back to your interactions with Mr. Manzari and Mr. Mahoney. You said you spoke with them. [Y]ou spoke with Mr. Mahoney on almost a daily basis during the negotiations of the ML II transaction, correct? A. Yes. Q. And with Mr. Manzari less frequently than that, but frequently? A. At least a couple of times a week. Q. [] Did Mr. Mahoney ever tell you that the Fed or Maiden Lane II wanted to acquire AIG’s fraud claims? A. No.” 81:13–82:3.

• “Q. Now, did Mr. Mahoney ever tell you―and I’m going to quote from him directly―that ‘the FRBNY and ML II intended to receive all transferrable or assignable benefits associated with the securities and related instruments, including litigation claims associated with those securities or their acquisition by AIG?’ A. I never talked to him about litigation claims during this process. Q. And did he ever tell you he wanted to have an assignment, or the Fed wanted to have an assignment, of those tort claims―of those fraud claims? A. No. We never talked about claims, you know, of any types. Q. . . . [D]id he ever even mention the word ‘fraud claims’? A. No, he did not. Q. Did he ever say anything that suggested to you that the Fed wanted to acquire, or ML II wanted to acquire fraud claims? A. No, he did not. Q. Did he ever say anything that suggested to you the Fed needed to acquire all litigation claims to protect the Fed from downside risk? A. No. The downside risk was proved with the collateral performance in ML II. Q. And when you’re talking about ‘collateral performance’, are you speaking about the residential mortgage-backed securities? A. Yes.” 82:21–84:9.

• “Q. Mr. Manzari, did he ever tell you that the Fed or ML II wanted to acquire fraud claims? A. No. Q. Did he ever mention fraud claims? A. No. Q. Did he ever say anything to suggest that the Fed or ML II wanted AIG’s fraud claims? A. No.” 84:10–19.

• “Q. Did anyone at the Fed say or suggest that the Fed or ML II wanted to acquire AIG’s fraud claims? A. No. Q. Did anyone representing the Fed, including its attorneys, say or suggest that the Fed or ML II wanted to acquire AIG’s fraud claims? A. No.” 84:20–85:4.

• “Q. Did anyone at AIG or representing AIG suggest, say anything to suggest that the Fed wanted to acquire AIG’s fraud claims? [Objection] Q. Were you told that by anyone at AIG? A. No.” 85:5–12.

• “Q. During the negotiations of the ML II transaction, were you aware of any document suggesting an intent by the Fed or ML II to acquire AIG’s fraud claims? A. No.” 85:13–17.

• “Q. If the fraud claims, the issue of assignment of fraud claims had been raised, is that something you would have expected to be brought to your attention? A. Yeah. I mean, we talked about, and presented to the Board, you know, what we thought the deal was; we presented to regulators, you know, what the deal was. And if it was a term and condition, I would have known about it.” 85:18–86:3.

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• “Q. Based on your experience in the business world and your role as lead negotiator for AIG, did you believe that AIG was transferring its rights to bring fraud, or fraud claims―its rights to bring fraud claims to ML II? A. Absolutely not. I mean, it’s―we were working collaboratively, and those issues just weren’t discussed and/or transferred as far as our final document and final agreement.” 86:4–14.

• “Q. Mr. Swift, based on all of the facts that you are aware of and your experience both as a businessman and lead negotiator for AIG, are you firm in your conviction that AIG did not transfer fraud claims to ML II? A. Absolutely. [Objections] A. We did not negotiate it; we did not intend to transfer it. And we were working, you know, collaboratively with the Fed and we talked about everything that was significant, we had a transparent discussion, they had their interest, we had ours. But this was never, ever discussed.” 127:4–21.

Swift testified that he did not believe AIG transferred any fraud claims to ML II.

• “Q. What is your understanding regarding whether or not the Asset Purchase Agreement transferred litigation claims from AIG to Maiden Lane II? [Objection] A. Again, as we―as we negotiated the tax points, as you mentioned before, or the residual equity interest, you know, that the five-sixth, one-sixth split, as we talked with, you know, the Finance Committee, the regulators, we did not talk about, you know, litigation because it really wasn’t a negotiated point. We didn’t believe we were transferring; we didn’t negotiate a transfer price. We didn’t talk about it because it just wasn’t―wasn’t part of, you know, the deal terms and conditions that we―we were trying to solve for.” 60:21–61:15.

• “A. RMBS’s [are] generally made up of multiple of individual mortgages that go―that are pooled. So, I believe what we were transferring was, you know, the securities and all the rights, stuff that back-up the mortgages that make up the RMBS security. Q. Is it your understanding that AIG was transferring something more than the securities? [Objection] A. No. I―what I believe we―we negotiated on the Term Sheet and that we were primarily responsible for was the sale of securities. Q. Was there anything else besides the securities that AIG was transferring as part of the Maiden Lane II Asset Purchase Agreement? [Objection] A. It was transferring the securities and the rights of those securities. I mean, we were conveying to the Fed, in exchange, you know, for cash, the securities and the rights that securities have with―with those securities.” 64:2–65:4.

• “A. [W]hen you trade a security, you’re giving up, you know, the economic rights to the underlying cash flows of it. So, whether it be in a market trade or the trade we did with the Fed, you know, the―the economics that back up the certificates, you know, the fees that you had to pay from a mortgage servicing side, the interests, the principal collections, all that is part of that security that we were selling. Q. And were there any other rights, besides that collection of rights, that you understood AIG was selling to Maiden Lane II? A. No, I’m not aware of anything else, and I probably should have been since, I mean, I was principally responsible for the Term Sheet.” 68:14–69:7.

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• “Q. Did you intend, as lead negotiator, to assign AIG’s fraud claims to ML II? A. No. Q. Did AIG [] intend to assign its fraud claims to ML II? A. No. Q. What did AIG believe it was selling and intend to sell to ML II? A. The underlying securities.” 86:15–24.

Swift testified that “Related Instruments” meant the documents and rights included in the securities.

• “Q. At the time that this Agreement was signed, December 12, 2008, did you have an understanding of what was meant by the words ‘together with all right, title and interest in and to all Related Instruments’? A. As we were negotiating, you know, the deal, I had the understanding that we were transferring the security right and interest in all the underlying mortgages that were part of an RMBS package.” 63:5–15.

• “Q. Did you understand the term ‘Related Instruments’ to include an assignment of AIG’s fraud claims to the Fed? A. No, I did not. Q. Why not? A. One, the word ‘fraud’ is not mentioned in this paragraph; and two, I interpreted this to mean the activities, the documents, the stuff that goes with servicing mortgages.” 80:2–11.

• “Q. Okay. I believe you said you’re not a lawyer, correct? A. Yes. Q. You’re a CPA and a businessman? A. Yes. Q. And from your perspective as a CPA and a businessman, when it lists the documents under the definition of ‘Related Instruments,’ what’s your thinking about what that means? [Objection] A. I believe it means . . . this is what people understood and they would have been clear if there was other things that would have included that could have been, can be significant. Q. And when you say they would have been clear if other things are included, are fraud claims within those other things that would have needed to be spelled out specifically? [Objection] A. That would be my understanding.” 80:12–81:10.

• “Q. Okay. At the time that the Asset Purchase Agreement was being negotiated, did you discuss with anyone the meaning of the term ‘RMBS Issue’ in the contract? A. I personally did not. Q. Did you discuss with anyone the meaning of the term ‘Related Instruments’ in the contract? A. I personally did not.” 128:21–129:5.

Swift testified that the sale price did not include any valuation of the ability to pursue fraud claims for losses already suffered.

• “Q. Do you recall how the price paid by Maiden Lane for the assets that it bought was calculated? A. Market value. Q. Do you know how that number was calculated? A. Market value is determined in a number of different means: sometimes observable third-party trades, sometimes mark-to-model trades, sometimes, I’ll call it cost is used as a basis of market value. So, the intent of the transaction was supposed to be based on the market value of the securities.” 46:13–47:2.

• “Q. And can you explain in a little more detail, please, the role of BlackRock? [Objection] A. I think BlackRock’s role in this transaction, you know, they were viewed as, you know, the leading industry expert on residential mortgage-backed securities and other structured product and had very sophisticated models that would predict ultimate cash flows coming off of, you know, mortgages for ultimate valuation purposes.” 115:22–116:8.

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• Q. Now, does the market value include a valuation for potential fraud claims? [Objection] A. I don’t believe so. Q. Why not? A. The best way I can explain it is, is that this, it’s a security value and representing the economics on the underlying investments in the securities. And again, I’m not a lawyer, but I just viewed fraud, fraud claims as separate and are usually, you know, contingent upon outcomes, and highly―highly unpredictable from a value side. So, I don’t―I don’t think the street values fraud claims, tries to put a value on these, a fraud claim into a security.” 113:14–114:8.

Swift testified that during the negotiation and sale of securities to ML II, he had general knowledge that AIG may have fraud claims.

• “Q. So, are you saying that you were thinking about fraud but you didn’t have a strategy? Or are you saying that you weren’t thinking about fraud claims? [Objection] A. We had not developed, you know, the―the strategy to go after. We had not discussed it in any, you know, I’ll call it great length or details at all as it relates to, you know, the securities that we were transferring at this point in time. Q. So, you had the idea but you hadn’t discussed it at any length? A. That’s fair to say. I mean, we had an awareness; I had a general awareness. But it wasn’t brought forward into a coherent strategy of how we were going to approach it.” 131:16–22.

Swift testified that had AIG been transferring fraud claims to ML II, he would have wanted to include that in the Term Sheet that was presented to the AIG Board of Directors.

• “Q. What was your role in the preparation of the Term Sheet setting forth the deal terms for the Maiden Lane II transaction? A. I would have been working with the lawyers that would have prepared it to document the key components.” 90:13–19.

• “Q. [W]hen the Term Sheet refers to ‘a certain pool of RMBS,’ what did you understand that to mean? A. The asset, the RMBS assets that were backing the securities lending obligations. Q. Is there anything in that definition that suggests to you that fraud claims are included in the asset being transferred? A. No. Q. Is the term ‘fraud’ used? A. No.” 93:9–21.

• “Q. There is a definition of ‘RMBS Assets’. Do you see that? A. Yes. Q. Could you read that definition into the record, please? A. ‘Collectively, the RMBS Issues listed in Schedule A hereto for each Seller and rights to the outstanding principal thereof and accrued interest thereon as of October 31, 2008 (for each Seller, an “Indicative RMBS Pool”) less the dispositions thereof and the collections of principal and interest thereon plus accrued interest thereon between October 31 and the Closing Date.’ Q. In your opinion as the chief negotiator for AIG, is that a fair description of the asset that was being sold to Maiden Lane II? A. Yes. Q. Is that what you understood the asset to be? A. Yes. Q. Do you see anything in that definition of the ‘Asset’ that suggests fraud claims are being transferred? A. No. Q. Do you believe that definition in any way includes fraud claims? A. No. Q. Why not? A. It doesn’t say so.” 93:24–95:7.

• “Q. Let’s turn to Schedule A, which is referred to under the definitions. . . . [I]t includes a bracketed statement that says, ‘List of RMBS Issues in RMBS pool to come.’ Do you see that? A. Yes. Q. What did you understand the ‘list of RMBS Issues’ to mean? A. The

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securities that were going to be sold. Q. Did you understand anything in the words ‘list of RMBS Issues’ to include fraud claims? A. No.” 95:8–96:10.

• “Q. If the ML II deal had included an assignment of fraud claims, would you have expected that to be listed in the Term Sheet? A. Yes. Q. Why? A. I think it would have been a significant, you know, deal point that we would have, you know, negotiated, discussed, tried to value and would have been, you know, sort of the completeness of, you know, dealing with if we wanted a transfer. It would have been self-evident that was the intent and we would have documented it and talked through the terms and conditions of how we would transfer it.” 96:17–97:7.

Swift testified that had AIG been transferring fraud claims to ML II, he would have wanted to present that to the Finance Committee of the AIG Board of Directors.

• “Q. What was the AIG[] Finance Committee’s role in reviewing the ML II transaction at this point in time? A. My understanding was it was the Committee that was responsible for major transactions, restructuring activities at the time for the full Board. Q. And do you recall that it―whether it had been delegated authority from the Board to address the ML II transaction at this point in time? A. I seem to recall they were responsible, so . . . .” 103:24–104:12.

• “Q. In your presentation to the Finance Committee, how did you describe the assets that were being sold to Maiden Lane II? A. As securities that were being transferred. Q. Did you mention fraud claims in your presentation? A. No, I did not. Q. Why not? A. Because it wasn’t a deal point where we transferred fraud claims.” 106:2–13.

• “Q. And if you had thought fraud claims had been assigned, what, if anything, would you have done differently? A. I would have mentioned it. Q. And why would you have mentioned it? A. As a significant deal point and an item that people would have and should have known that we were giving up, you know, rights to, to those future fraud claims.” 106:14–23.

• “Q. Did Sarah Dahlgren or Davis Polk say anything to suggest that your description of the assets transfer was inaccurate? A. No. Q. Did Sarah Dahlgren or anyone from Davis Polk make any mention of fraud claims? A. No.” 106:24–107:6.

• “Q. Do you see that the document, starting on page ‘2323, is a memorandum to the AIG Finance Committee? A. Yes. Q. And it is from David Herzog and Christopher Swift, correct? A. Correct. . . . Q. The first sentence of that bullet point says, ‘The LLC would immediately use the proceeds of the senior loan from the FRBNY described above to purchase the RMBS from the AIG insurance companies,’ correct? A. Yes. Q. What did you understand ‘RMBS’ to mean? A. The individual securities that were being sold. Q. Did you understand it to include fraud claims? A. No. Q. Does the memo anyplace mention fraud claims? A. No. . . . Q. And the last sentence is, ‘The RMBS will be the only assets of the LLC.’ Do you see that? A. Yes. Q. Again, in that sentence, what do you understand ‘RMBS’ to mean? A. The individual securities.” 107:12–109:15.

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Swift testified that had AIG been transferring fraud claims to ML II, he would have wanted to present that to the state insurance regulators.

• “Q. What was your role in making presentations to insurance regulators about the ML II transaction? A. Yeah, I was the lead spokesperson for AIG’s Life and P[&]C companies on the securities lending matter. Q. And what type of oversight, what type of information did the regulators want to hear from you as the principal presenter? [Objection ] A. They want―they wanted, and expected, transparency on anything significant.” 99:13–100:2.

• “Q. [Discussing presentation to insurance regulators] Is there any reference to the assignment of fraud claims to ML II in Exhibit 77? A. No. Q. In making your presentations to insurance regulators, how did you describe the assets that AIG was selling to ML II? A. Throughout the various pages in here, you can see that we were―we―we were referring to the assets, . . . either as the RMBS assets or the non-RMBS assets. . . . [T]he RMBS assets, as it related to the ML II transaction, were described as residential mortgage-backed securities. Q. And did you say anything to the regulators that might suggest fraud claims were being assigned? A. No.” 101:3–102:2.

• “Q. If you had believed that fraud claims were assigned to ML II, what, if anything, would you have done differently in your presentations to insurance regulators? A. At minimum, I probably would have had a bullet point just talking through it as―as a deal point. Q. Why? A. I think, again, if―if you really understand the nature of the securities lending pool, these were the assets and obligations of the underlying insurance company’s balance sheets. And if AIG gave up that right and obligation, the insurance commissioners will want to know about a future monetizable asset, or future recovery that was also, you know, given up. So, anyway, it would have just been a significant part of the overall transaction we would have talked about.” 102:3–23.

Swift testified that ML II was intended to stabilize AIG while ensuring the FRBNY would be repaid.

• “Q. In structuring this Maiden Lane II transaction, what was your understanding of the objective as to AIG going forward? [Objection] A. I mean, the objective of AIG was to stabilize, continue to stabilize, you know, the organization with a solution to a program that―that created large credit losses and some inherent volatility in its equity position. Q. So, to put it in more simple terms: Was the transaction part of a solution to help AIG recover from the financial crisis? A. I believe so.” 120:14–121:4.

• “A. The Fed made it very clear that it was a lender. It was intent on having its loan repaid, and it used BlackRock and us to give them comfort that, under various economic conditions and scenarios, their loan would be repaid. They made it very clear that they had never had a loss on a loan they made, and they never intend to have a loss on a loan that they made.” 82:7–16.

• “A. That was the Fed’s primary objective, was to always be viewed as the lender, and they never were going to be allowed/permitted to incur a loss. Q. Did you understand why this transaction resulted in a very low likelihood of failing to repay the

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senior debt? A. Because of the structure. Q. And with respect to the securities themselves, the RMBS that were being sold, how did that contribute to a low likelihood of failing to repay senior debt? A. The 24 billion [price] was viewed, at least by me and AIG, as a―as a depressed value due to the market conditions at that time. And that if you looked to different, you know, I’ll call it, conditions of how the cash flows would perform, not how the market, you know, was, you know, marking these securities to market at the time, there would be adequate cash to pay off the debt . . . and then be able to share any upside potential in the residual cash flows . . . . A. I think later in the document we show various scenarios that, you know, the Fed would still make money on this transaction.” 117:12–119:3.

• “Q. Do you believe that further decline had any impact on the Fed’s likelihood of full recovery? [Objection] A. Not―not from what they ultimately funded. So, I don’t recall with specificity what they exactly funded in the final, final deal. But if we were modelling the 23, 23 and a half billion, I think they funded something less, so they put less principal at risk. And ultimately, AIG and its subsidiaries sort of bore the difference in value. Q. And the reason, again, that this further decline would not affect the likelihood of full recovery is what? [Objection] A. My belief was that the ultimate, you know, cash flows were still sufficient to pay off the Feds, you know, primary investment.” 125:19–126:16.

• “Q. Did you believe at the time you were negotiating the ML II transaction, that the Fed was going to make money on the transaction? A. I did. Q. Do you know if the Fed, in fact, did make money? A. I’ve read press reports that they did make money. Q. Do you know about how much? A. About $2 billion.” 126:17–127:3.

Swift testified that ML II was beneficial to many different groups.

• “Q. Was the Maiden Lane II transaction viewed as beneficial to AIG? A. I would view it as, yes, beneficial to a lot of different constituencies. I would view it as beneficial to AIG and its shareholders; I would view it be beneficial to policyholders of the Life Company that had, you know, significant credit exposure. I viewed it as positive to the regulators that had more security. I viewed it as a good for the American taxpayers, because a lot of this money then went to others that were able to use it for their liquidity purposes and not have a continued meltdown on the financial system. So, it was beneficial to a lot of different groups, and primarily AIG.” 72:10–73:3.

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Deposition Testimony of R. Edward Holmes, Jr. March 19, 2013

Edward Holmes was the lead internal counsel representing AIG on Maiden Lane II.

• “Q. You said you were involved in Maiden Lane II, correct? A. Yes. Q. And what was your involvement? A. I was the lead internal counsel representing AIG. Q. What did you do in that capacity? A. I oversaw external lawyers representing AIG; I spoke with and represented the business people within AIG; I interacted directly with the Fed, Davis Polk, and representatives of the Fed, for instance, Ernst & Young; and I coordinated with lawyers within AIG with regard to, for instance, insurance-specific issues.” 27:18–28:8.

• “Q. Who did you consider your internal client in Maiden Lane II? A. There were a number of business people involved, but by that point in the deal, Chris Swift was really taking the lead among the business people.” 28:18–23.

• “Q. And with respect to the terms of [] AIG’s agreement with the New York Federal Reserve Bank, who did you deal with internally on what those terms would be as opposed to operational issues? A. Mainly Chris Swift.” 30:3–8.

• “Q. Were you involved in the documentation of the Maiden Lane II transaction? A. Yes.” 35:20–23.

• “Q. Were you involved in negotiations concerning the Asset Purchase Agreement that was signed in connection with Maiden Lane II? A. Yes. Q. [] What was your role in connection with the negotiation of the Asset Purchase Agreement? A. I was lead internal counsel representing AIG companies. Q. And could you describe what you did as the lead internal counsel concerning the negotiation of the Asset Purchase Agreement? A. Sure. I went to—I reviewed documents; I interacted with our outside counsel; I interacted with the Fed; I interacted with Davis Polk; I interacted with internal counsel on insurance issues; I interacted with business people, our own business people; I was in meetings relating to, you know, putting—putting the Asset Purchase Agreement in place, including the operational type of meetings that we’ve already talked about.” 35:24–36:23.

• “Q. You mentioned that you reviewed documents. Did you review drafts of the various agreements that were put in place as part of Maiden Lane II? A. Yes. Both the Term Sheets and Asset Purchase Agreement. Q. Did you provide feedback on those drafts? A. Yes. Q. Did you provide that feedback directly to people at the Fed or representing the Fed? Or did you provide that feedback to someone representing AIG? [Clarification] A. I think—I think all. I think I provided feedback to our own business people, our outside attorneys, and on occasion, directly to people at Davis Polk.” 36:24–37:17.

• “Q. Now, describe for us, if you would, your role, if any, in creating the Term Sheet on this deal? A. The Term Sheet itself, I believe, was drafted by Davis Polk. But I would have been involved in reviewing in detail the Term Sheet. Q. Did you play any part in negotiating the Term Sheet? A. Yes. I would have given comments to both my business people and to Sullivan & Cromwell, and those comments would have been passed on to Davis Polk and the Fed. Q. Did you deal directly with anybody at the Fed or any of their representatives in negotiating the Term Sheet? A. On at least—on at least

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one occasion, I was dealing directly with Mr. Heckart. Q. [] What level of familiarity would you describe yourself as having with respect to the Term Sheet? [Objection] A. I reviewed the Term Sheet thoroughly.” 132:21–133:21.

Holmes testified that he had no discussions with anyone about transferring AIG’s fraud claims.

• “Q. I’d like to ask you some questions about the period from whenever you learned about it in October until when [the APA] was executed . . . in December of 2008. . . . During that time period, did you have—did you discuss with anyone the question whether AIG would be transferring legal claims to Maiden Lane II as part of the transaction? . . . A. There was—there was no discussion about transferring tort claims, we’ll call them—I’ll call them, during, during the course of those discussions and—I’ll end there.” 53:3–23.

• “Q. Do you recall any discussion with anyone about whether AIG would be transferring legal claims that can be asserted in a lawsuit to Maiden Lane II as part of the transaction? [Objection] A. Yeah, so, as I think you know, we’ll just say, there are different rights that you have with—to pursue. So, as you know, the rights to get the—cause the trustee to go get securities, mortgages back whenever the mortgages don’t meet certain standards as set out in the documents is a right that goes with the documents. To the extent you’re asking me—and I think you are—about rights associated with AIG’s losses at the time AIG owned the securities, and that were—arose as a result of communications relating to the securities in connection with AIG buying them, those claims, those second set of claims, we never, ever discussed transferring those.” 58:23–59:24.

• “Q. Mr. Holmes, I think you testified earlier that during the time frame we were discussing, between when you first learned of Maiden Lane II and when the con—the Asset Purchase Agreement was signed, you had no discussions with anyone about whether tort claims would be assigned by AIG to Maiden Lane II; is that correct? A. That’s correct.” 61:20–62:3.

• “Q. Do you recall any discussions about whether any causes of action that AIG possessed would be transferred to Maiden Lane II? A. Other than enforcement rights in the documents, which we’ve talked about, AIG’s rights were not going to transfer and there were no discussions about that.” 62:25–63:8.

• “Q. Do you recall any written communications that you had with anyone regarding whether or not AIG would be transferring any tort claims to Maiden Lane II? A. I don’t recall any communications on transferring tort claims.” 68:22–69:4.

• “Q. And do you recall any written communications about whether or not AIG would be transferring the right to bring statutory claims relating to the RMBS to Maiden Lane II? A. . . . [T]here was no discussion of those types of claims. Q. And no written communications on the subject? A. No. No written, no oral. No. Nothing.” 69:12–70:4.

• “Q. Do you recall any written communication concerning whether or not AIG would be transferring causes of action to Maiden Lane II? A. No, I would lump that in with the same general category of the previous two we talked about.” 70:5–11.

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• “Q. Are you saying that it’s not something that you thought about at the time because of what the circumstances were? Or are you saying you did think about it? [Objection] A. I’m saying that I knew the law from prior experience, and that there[] simply was no discussion of transferring what we’re calling the ‘tort claims’.” 74:18–75:2.

• “Q. Do you know why it was that AIG was briefing its insurance regulators about the ML II deal? [Objection] A. Yes. Because a deal of this magnitude, we would not—we would not execute without having briefed the regulators. Q. And how do you know that? A. Custom and practice. It’s what we do for—for much, much smaller deals and points than this. . . . Q. [D]o you see any reference in there [the presentation to insurance regulators] to AIG assigning any tort claims to ML II as a part of the ML II transaction? A. No.” 137:16–139:22.

• “Q. Is that something you would have expected to see in this document had such an assignment been intended? [Objection] A. It would have needed to be in this document. Q. Why? A. Because of the purchase price being market, market not including those types of claims. So, we would have needed to indicate to the regulators that was something we were―the insurance companies were giving up value on. And the regulator itself, one of the primary concerns of the insurance regulators is affiliate transactions which is, effectively, transfer of value from the regulated balance sheet to other affiliates. That was a particular concern during this time, and the regulators would have been looking for, you know, whether or not there was value going to other parts of the organization and being given up by the insurance companies as a result of, you know, having given those claims away for, effectively, free.” 139:23–140:25.

• “Q. At any point in the negotiation of the Asset Purchase Agreement, did anybody from the Fed or any of the Fed’s representatives convey to you in words or substance that the Fed sought to acquire, through the ML II transaction, litigation claims associated with the RMBS securities or their acquisition by AIG? [Objection] A. No. I never saw, heard, was aware of any intent on the part of Maiden Lane II or the Fed to acquire the litigation claims.” 145:24–146:12.

• “Q. At any point during the negotiation of the Asset Purchase Agreement, did anybody from the Fed or any of the Fed’s representatives convey to you, in words or substance, that the Fed or ML II sought to acquire, through the ML II transaction, all transferrable and assignable benefits associated with the RMBS securities and related instruments? [Objection] A. No.” 146:13–24.

• “Q. At any point during the negotiation of the Asset Purchase Agreement, did anybody from the Fed or any of the Fed’s representatives convey to you that the Fed and ML II sought to receive, through the ML II transaction, litigation claims associated with the RMBS securities or their acquisition by AIG? [Objection] A. They never did.” 147:10–20.

Holmes testified that he did not believe AIG’s fraud claims transferred.

• “A. It was my understanding throughout the process that we were transferring title to the securities, and the other ancillary rights that went with the securities, which meant voting rights, the right to enforce documents, the right to receive principal

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and interest; the types of claims that an owner of the documents or an owner of the securities would have.” 57:19–58:3.

• “A. If somebody had asked me, if anybody had asked me, you know, are the tort claims transferring as part of this deal? I would have told them no.” 75:3–6.

• “Q. So, you thought about whether or not there would be a legal claim that AIG could pursue to recover those losses on these RMBS? [Objection] A. I knew that there was a loss. I knew it would be realized from AIG’s perspective. But whether or not it would have been actionable in the legal sense, you know, was unclear and would have required the litigators to come in, look at the facts, and figure out whether or not if it was actionable. And that analysis had not been done at that time. Q. [] So you hadn’t reached some conclusion about whether or not AIG could pursue claims? A. That’s correct. Q. But you thought about maybe we could pursue claims? A. Yes.” 77:10–78:7.

• “A. [Referring to ML II Term Sheet] And so, what’s being stated here is that the securities that would be listed on Schedule A is—is what’s transferring, less principal and interest payments that accrue between October 31st and the Closing Date, which were payments that we would have collected already. So, that was being backed out of the purchase price. Q. So, according to the Term Sheet, as you understood it, what was being transferred to ML II in this deal? [Objection] A. The securities that were listed and the rights in those securities.” 134:14–135:4.

• “Q. To your understanding, did the scope of what was being transferred, as you just described it, change between the Term Sheet and the execution of this final [APA]? [Objection] A. No.” 135:9–16.

• “Q. Mr. Holmes, what is your understanding regarding whether the Asset Purchase Agreement transfers tort claims from AIG to Maiden Lane II? A. My understanding is it does not.” 98:20–24.

• “Q. And did you have an opportunity to review the Complaint in this case before it was filed by AIG? A. Yes. Q. And did you understand that that Complaint asserted tort claims against the Defendants arising out of their sale to AIG of certain of the RMBS that were later sold to ML II? [Objection] A. They were earlier sold to ML II, yes. Q. And did you have at that point any objection to AIG filing that Complaint? A. No.” 148:2–17.

• “A. My initial reaction [to BoA’s argument that AIG transferred claims to ML II] and my reaction now are the same, which is that those claims were never transferred.” 149:6–8.

Holmes testified that he had prior experience with transferring tort claims, and that he would have taken different steps had he been aware the FRBNY intended to acquire such claims.

• “Q. Now, you testified earlier that you were familiar with certain law relating to the transfer of tort claims at the time the Asset Purchase Agreement in ML II was negotiated and executed. A. Right. Q. What did you understand about the law on that subject back at that time? [Objection] A. It’s my understanding that in order to transfer tort claims, you need to specifically address it in the—in the assignment documents. Q.

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And to your understanding, did that occur in the Asset Purchase Agreement? [Objection] A. No, it didn’t.” 143:5–24.

• “A. I knew from work I [had] done, I felt the law was that to transfer tort claims, they have to be specifically addressed. And there are types of form documents out there that specifically addressed transferring tort claims.” 71:9–14.

• “A. We had specific experiences where we had done that [transferred tort claims], and due to the misalignment of interest between the people that ultimately held them and our witnesses, and other data, we—we hassled. But really it was, you know, we would have to provide data, depositions and things whenever—we had never – and we didn’t have an interest in the outcome of the case anymore. And so, you know, had – had I known, had I known that, you know, the Fed might have wanted those claims, that would have been one of the things we would have needed to talk about. We would have needed to talk about price, enforcement, whether—you know, how we stop it whenever, whenever it’s getting out of hand for us, because of the potential misalignment of interest in previous work I’d done in that—in that regard.” 71:15–72:11.

• “A. [M]y own experience and AIG’s experience in transferring those types of claims, which we had done in other context, was that you needed to deal with additional issues like the potential misalignment of interest between the party that has the claims then and can—for lack of a better way to say it, pursue, pursue those claims without regard to the cost to AIG in providing data, depositions and other materials necessary in order to pursue those claims.” 144:7–18.

• “A. So, you can be put in a position where you’re doing a whole lot of work to support the claims and, yet, at the same time, you’re not getting any of the value out and you can’t stop the other party from continuing to pursue them. We had had a problem with that, you know, previously that I was involved in. Q. And are there any provisions in the final version of the Asset Purchase Agreement that deal with that potential problem that can arise when tort claims are assigned? [Objection] A. No . . . [there are] not.” 144:19–145:11.

• “A. I knew at the time, under New York law, that you needed to specifically refer to them [tort claims]. I knew that we would have needed to deal with making data available to the Fed to allow them to pursue those claims if they were to have received them. We needed to think about limiting the scope of data. If we wanted to, we needed to think about if the price being paid made sense. If there is no additional compensation in terms of the security, we needed to think about whether or not the one-sixth remainder would justify some of the potential lawsuits that might have been filed. There were a number of things that needed to be thought through and dealt with in order to—to transfer those claims in a meaningful way.” 149:9–150:3.

• “Q. And was that your only other prior experience with the transfer of litigation claims that you were referencing in your earlier testimony? A. No. . . . There were others, both in the context of—of an assignment, and then separately having to deal with the misalignment of interests that occurred in one case whenever we transferred the

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litigation claims, and didn’t retain any rights to the proceeds as a result of the litigation. So—so, there were multiple times that I dealt with transferring litigation rights . . . .” 157:17–158:12.

Holmes testified that the “Related Instruments” language was meant to clarify what ML II was acquiring from AIG.

• “A. I don’t recall any specific discussion on ‘Related Instruments’. Q. Did you have any written communication with anyone regarding the definition of ‘Related Instruments’? A. I don’t think so. Q. . . . I want you to focus on specifically the phrase ‘all right, title, interest in and to all Related Instruments.’ Do you see that language? A. Yes. Q. Prior to the execution of the Asset Purchase Agreement, do you recall discussing that language with anyone? A. No. Q. Prior to the execution of the Asset Purchase Agreement, do you recall any written communications with anyone regarding that language in this definition? A. No.” 85:10–86:13.

• “Q. Did you have any discussions about whether breach of contract claims would be transferred from AIG to Maiden Lane II? A. I don’t remember that specifically. What was clear to me was that the Fed wanted to control the securities, and—and so they were interested in making sure that they got the right to have full control of the securities, you know, while they were owned by Maiden Lane II.” 62:5–14.

• “A. [T]he point of the sections that we talked about [definitions of ‘Related Instruments’ and ‘RMBS Issue’] is to ensure or to clarify exactly what’s being assigned. And the ‘Related Instruments’ definition adds to or creates additional clarity around exactly what it is ‘RMBS Issue’ includes. So, you got the main—main securities listed on Schedule A, and then, you know, together with ancillary rights in the related instruments; and then you’ve got—you’ve got the other types of deal documents here listed that you might have in a mortgage-backed security.” 107:9–22.

• “Q. So, in your understanding, the—what the language ‘together with all right, title and interest in and to all Related Instruments’ does, is to say that you get all the rights you would have gotten in a market sale of these securities? A. Basically. Q. Is there anything else that that language does? A. No.” 108:22–109:7.

• “Q. Is it your understanding that the Maiden Lane II received exactly the same rights it would have received if it purchased the securities in the open market? A. Yes.” 109:8–12.

• “Q. Okay. And so, in your understanding, there were contract rights that were transferred to Maiden Lane II? A. That’s correct. Q. But if AIG was harmed while it owned the security and had a legal cause of action it could pursue regarding that harm, that was not transferred? A. That’s correct. Q. And that doesn’t matter whether it’s a tort claim or a breach of contract claim or a statutory claim? A. That’s correct.” 120:7–19.

• “Q. And in this instance, why was it—why was an Asset Purchase Agreement necessary? Why not simply transfer all these securities electronically? [Objection] A. Among other things, the—so—so, the exhibit to the Asset Purchase Agreement, which lists out all the securities and the pricing, needed to be agreed ahead of time; we needed to know how much money would go from Maiden Lane II to the AIG companies; the Fed

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and Maiden Lane II needed to know the CUSIPs that were transferring; we needed to deal with the purchase price mechanics and principal and interest payments afterward. So we’ll call those operational reasons. And we would have needed to go through that exercise regardless. In addition to that, the Fed was, for instance, interested in receiving ‘true sale’ opinions, that we talked about earlier, to ensure that—that Maiden Lane II was getting the true sale of the securities. And, in addition, the Fed got some—some representations from the sellers that they wouldn’t have otherwise received. Q. Do you know whether all of the securities that were transferred through the ML II deal were publicly traded? A. I believe some of them were private. Q. And with respect to residential matter—residential mortgage-backed securities that are not publicly traded, can those be transferred, to your understanding, without some sort of asset purchase agreement? A. Typically you’d have an assignment document that goes with them.” 141:13–143:4.

Holmes testified that AIG did not sell its RMBS into the market in order to avoid depressing already depressed prices for those securities.

• “Q. Why didn’t AIG just sell them in the open market then? A. Because you can’t sell the mark—the volume in the market was such that you couldn’t sell that volume of securities in any reasonable period of time. And so we didn’t want to further depress the market by selling into it, and the Fed didn’t want us to do that. Q. Is it your testimony that if AIG took all of these securities to market on, say, October 31, 2008, it could not have sold them? A. That’s correct.” 109:22–110:15.

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Deposition Testimony of Steven J. Manzari March 15, 2013

Steven Manzari was the FRBNY’s “number two” person in charge of its relationship with AIG.

• “Q. Were you the second most senior? A. So, there were several senior vice presidents. Sarah [Dahlgren] was a senior vice president at that time, but she was the team leader of the team, and I functioned as her number two.” 17:9–14.

• “Q. You told us that Sarah Dahlgren was the most senior person and you functioned as her number two, correct? A. Yes. Q. . . . Was there another number two? Or did you understand your role to be the next senior person on the team below Sarah Dahlgren? A. I think that’s how Sarah would have described my role.” 146:19–147:7.

• “A. So, to the extent that, for instance, one of my colleagues was assigned to the Maiden Lane III transaction, another one was assigned to the Maiden Lane II transaction, they, I think, would have been far more involved in the specific drafting of the legal agreements, etcetera. Q. And who was that . . . for Maiden Lane II? A. James Mahoney.” 106:2–12.

• “Q. [Y]ou certainly understood what the terms of the transactions were as between ML II and AIG, correct? A. Yes.” 110:4–8.

Manzari repeatedly testified he had no discussions with anyone about transferring AIG’s fraud claims.

• “Q. Do you remember any discussion leading up to the execution of the Maiden Lane II documents about AIG somehow giving up its rights to try to seek any recovery from anyone for the losses of the $17 billion? A. No.” 99:15–20.

• “Q. At any point in time, were you involved with any—in any discussion? And this is either with AIG or internally at the New York Fed—in which there was a discussion that in entering into Maiden Lane II, AIG would be in any way giving up its right to seek a recovery against any banks associated with that $17 billion loss? [Colloquy] A. I don’t recall any discussions.” 99:21–100:14.

• “Q. You’re not aware of any discussions that you participated in with anyone from AIG in which there was any discussion about AIG giving up claims that it might have to go after the banks that had sold it the RMBS to try to recover those losses, correct, sir? A. I don’t recall any conversations in that regard.” 100:18–101:2.

• “Q. [T]here was no discussion between the New York Fed and AIG regarding what would happen with such legal claims, right? [Objection] A. If your question is about legal claims, I don’t recall any conversations about—if you’re talking about things like reps and warranties, I don’t recall any conversations about that. Q. With AIG? A. With AIG. Q. How about internally at the New York Fed? A. I don’t—I don’t recall any conversations about those . . . specific factors.” 103:17–104:13.

• “Q. [E]arlier I asked you the question of whether you recall any discussions with anyone regarding the idea or the concept of AIG somehow giving up claims that it would have against bank counterparties with respect to its losses suffered when it initially purchased

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the RMBS that it then sold to ML II. Am I correct, sir, you don’t recall any such discussions even with Mr. Mahoney? A. No, I don’t recall. I do not recall that topic coming up.” 108:24–109:12.

• “Q. And I take it that Mr. Mahoney has never raised the issue with you at any point in time, correct? A. No. Q. I’m correct? A. Yes, correct.” 121:9–14.

• “Q. Have you ever heard anyone, through today, within the New York Fed, ever say that in connection with the Maiden Lane II transaction, AIG somehow gave up or gave away its claims to pursue against the bank counterparties that initially sold it its RMBS? [Instruction] A. Oh, I really do not recall this topic coming up.” 117:23–118:12.

• “Q. Have you ever had conversations with anybody about that subject matter? A. Yes. Q. Okay. And would that be counsel? A. Yeah. Q.[] Other than counsel, I take it you haven’t had conversations with anybody? A. I don’t remember having a conversation about this. Q. And the conversations that you had with counsel, how recent were those? A. A week or two ago maybe.” 119:5–17.

• “Q. Would it be correct, then, at least from your standpoint when you entered into—the New York Fed, when it entered into the Maiden Lane II transaction, you did not have an understanding that AIG was in any way giving up legal claims that it might have to pursue against the banks that had sold it the RMBS issue that it was now selling on to ML II? [Objection] A. So, we didn’t have—I just don’t recall this topic coming up.” 122:3–18.

• “Q. [Regarding negotiating the APA] And so, if it contained language that refers to ‘all right, title and interest and related instruments,’ you’re not familiar with that language? A. That is correct.” 232:6–10.

Manzari testified that ML II was always a sale of securities—and nothing else.

Manzari understood ML II to be a sale of securities—and nothing else.

“Q. It was your understanding that what was being proposed is that the assets that would be sold by AIG to Maiden Lane II was a pool of residential mortgage-backed securities, correct, sir? A. Yes. Q. Anything else? A. I don’t think so.” 98:3–10.

The Board of Governors approved the purchase of RMBS by ML II—and nothing else.

“Q. But roughly, when did you understand the authorization had already been given to execute the Maiden Lane II transaction? A. I believe —the formal authorization happened with a—by the Board of Governors some time—in early November shortly prior to sort of the announcement of all the transactions.” 116:13–21.

“Q. And they were also authorizing that what Maiden Lane II would be purchasing were AIG’s residential . . . mortgage-backed securities, correct, sir? A. Yes, that’s right.” 254:23–255:5.

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• The loan to ML II was to be repaid by cash flows and asset sales—and nothing else. “Q. The loan would be paid—would be repaid by virtue of cash flows from the

underlying mortgages within the residential mortgage-backed securities as one source, correct? A. Yes. Q. And the other source being the sale of those securities, correct? A. That’s right. Q. And that’s it, correct, as far as you understood it? A. I—yes. I don’t know how else Maiden Lane II would have gotten repaid.” 255:25–256:13.

• The FRBNY and its advisors determined the price for AIG’s RMBS based on the value of the securities’ cash flows—and nothing else.

“A. [W]e had BlackRock run, using its own fair value process on the firm— on those same securities.” 60:16–19.

“Q. [T]he cash flows that you talked about coming out of the underlying loan pools, would be the cash flow that’s generated from [] the principal—principal payment of the mortgages, correct? A. Yes, They—it would be the underlying interest and principal payments that flow through the [underlying] mortgage pools as a result of just about any of the consumer behavior that generates cash flows out of mortgages.” 62:25–63:13.

“Q. So, to be clear, the price that was determined by the modelling to arrive at fair value was based upon modelling of the expected future cash flows generated by the underlying mortgages with some discount factor being applied back, correct, sir? A. That’s right. Q. And that’s what your understanding was in the totality of how that market value pricing was arrived at, correct, sir? A. That’s right.” 67:10–20.

“Q. In your understanding, did the model that BlackRock used to determine fair value take into account any risk associated with possible fraud in the issuance of the securities? [Objection] A. I don’t believe it would have.” 225:22–226:6.

• The FRBNY’s loan to ML II was fully secured by RMBS—and nothing else.

“Q. And in connection with the $85 billion credit facility that was extended to AIG on September 16th, that credit facility, to your knowledge, was in compliance with 13.3; that is, the Fed believed that it was secured to its satisfaction? A. Yes, that’s correct.” 237:16–23.

“Q. And am I correct that the same 13.3 issues existed; that is, that the Fed had to be satisfied that the loan to Maiden Lane II was fully secured at least to the Fed’s satisfaction? [Objection] A. That’s right. Q. And in fact, once the loan was made, can we take that as the strongest indicia that the Fed was satisfied that it was fully secured to its satisfaction? [Objection] A. The—yes, we believed that we were secured to our satis—I believe we were secured to our satisfaction. Q. And that’s because you had a—‘you’ meaning the New York Fed, had a, as collateral, the assets of Maiden Lane II, correct? A. Yes. The RMBS that w[ere] purchased from AIG. Q. Okay. So, the residential mortgage-backed securities that had been sold into Maiden Lane II was the collateral that gave the New York

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Fed the comfort under 13.3 that it had security, or full security, to its satisfaction . . . correct? A. Yes.” 238:18–239:24.

Manzari was never asked about his intent with respect to whether litigation claims were transferred, although he was intimately involved in the FRBNY’s negotiation of ML II.

• “Q. Do you have any recollection at all of being asked by Mr. Baxter or anyone within the New York Fed, for you to provide historical information or views as to the rights that were or were not transferred to Maiden Lane II in 2008? A. No.” 143:23–144:5.

• “Q. [Referring to representation of FRBNY’s intent to obtain litigation claims in Settlement Agreement] You’ve never seen that representation before, correct, sir? A. That is correct. Q. And you were asked whether you had any basis to disagree with it. You also have no basis to agree with it, correct, sir? A. Yeah, that’s correct.” 234:3–13.

• “Q. At the time that Maiden Lane II documentation was being executed, the Asset Purchase Agreement, or the APA which you were asked about, Mr. Taylor [who executed the Settlement Agreement] had nothing to do with Maiden Lane II; am I correct? A. He—I don’t believe he was employed by the New York Fed at that time. Q. . . . You do know, because you were involved, you do know what the Fed’s intent was in entering into Maiden Lane II, correct, Mr. Manzari? A. I believe I do, yes.” 235:21–236:12.

Manzari testified that the FRBNY did not enter into ML II to make a profit.

• “Q. And is it the case that at that point in time—so, the fall into the winter of 2008—the markets themselves were in crisis? A. Significant stress.” 53:5–9.

• “A. What I would say is that we became involved with AIG when senior policymakers at the Federal Reserve, and the Treasury, and other parts of the government made a determination that the disorderly failure of AIG would have been unacceptable consequences for the U.S. economy.” 165:23–166:5.

• “A. Our overall objective was to prevent the disorderly failure of AIG. ‘Cause we believed it was—it would have been a very big problem for the U.S. economy.” 154:21–155:2.

• “A. I think that’s all indicative of some fairly unique stress in the financial system. Q. So, it wasn’t a problem that was unique to AIG, correct? [Objection] A. I think it was—in my view, it would be both. AIG had their own specific issues, and there was broad stress as well.” 245:2–11.

• “A. The point of that was to demonstrate to the rating agencies that there was a comprehensive package of actions that—that the U.S. Government was going to take to support AIG.” 161:24–162:4.

• “Q. Was it also important to structure the assistance in a way that made it more likely that the assistance would be paid back? A. We have a requirement that we need to be secured to our satisfaction. Q. But along with preventing the failure, it was important that the credit you were extending, in fact got paid back? A. Yes, that would—yes. Very much so.” 173:25–174:15.

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• “Q. Is that part of what was motivating the New York Fed in entering into Maiden Lane II, to generate profits? Or was it—that was not something factored into the Fed’s thinking? [Objection] A. No, it was not a significant factor in our thinking. Q. Meaning profits? A. That’s correct.” 85:20–86:5.

• “Q. [Referring to Ms. Dahlgren and Mr. Baxter’s testimony] Do you see right above ‘conclusion’, the two witnesses testified: ‘that said, our goal was never to make money. It was to avoid the systemic consequences that would have resulted’? Do you see that? A. Yes. Q. And that is consistent with your view, correct? A. Absolutely.” 87:5–14.

• “A. Just to be quite clear, it was never our intention. This wasn’t a profit-seeking venture. Q. I appreciate that. But it turned out, nevertheless, to have been a profitable venture, correct? A. Yes.” 248:7–13.

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Deposition Testimony of James M. Mahoney March 18, 2013

James Mahoney was the “business lead” for the FRBNY on Maiden Lane II.

• “A. That question has to do with my interaction as the business lead on the purchases of those RMBS securities from Maiden Lane into the―from AIG into the Maiden Lane vehicle.” 60:25–61:5.

• “A. I was the business lead and so I did not have the pen in drafting any of the legal language. I relied exclusively on counsel for that.” 138:23–139:2.

• “Q. . . . [Y]ou would be among the persons most knowledgeable? A. Yes. I may be the most knowledgeable. Because I―I pursued this from the very beginning, in September 2008, through the closing in―in December of 2008 so . . . .” 99:21–100:4.

• “A. What I was involved with is picking the securities that would be bought in to this Maiden Lane vehicle; the date at which they would be transferred; their valuation date will be done with the cash flows that the securities generate between the valuation date and the execution date; the prices at which things would be transferred; how accrued interest and how interest on those cash flows that came in between.” 139:3–14.

• “Q. [Davis Polk] was the law firm that was representing the New York Fed and ML II, correct? A. That’s correct. Q. And . . . Davis Polk was orchestrating the legal documentation for both ML II and ML III, correct? A. That was my understanding.” 242:8–16.

Mahoney repeatedly testified he had no discussions with anyone about transferring AIG’s fraud claims.

• No discussions about transferring fraud claims with anyone from AIG.

“Q. Do you remember discussing with AIG the idea of potentially assigning away fraud claims that AIG may have had in connection with its purchase of those RMBS securities? A. No, I do not.” 80:18–23.

“Q. And you[] also, by definition, had no such conversations with anyone from the AIG side, correct? A. That’s correct.” 82:18–21.

“Q. Do you know if—do you know if anyone at the New York Fed or representing the New York Fed ever told AIG in words or substance that the Fed expected to receive AIG’s fraud claims or tort claims as part of the ML II transaction? A. No.” 85:7–13.

“Q. You didn’t have any discussions with anyone from AIG in which there was a discussion that AIG was somehow giving up its rights to pursue a recovery for that $18 billion loss against the institutions that may have wronged it; am I correct? [Objection] A. It is correct that I have no knowledge of any conversations like that.” 124:3–12.

“Q. Do you ever recall having a conversation with Sonia Hamstra in which you said to her that, as part of the ML II transaction, you want ML II to acquire or to

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receive an assignment of AIG’s rights to pursue claims against the bank’s counterpart—parties that sold it the RMBS securities? A. No.” 228:2–10.

“Q. Do you remember having that conversation with Mr. Swift? A. No.” 228:11–13.

“Q. Do you ever remember having that conversation with Mr. Holmes? A. No, definitely not.” 228:14–16.

“Q. And do you remember having that conversation with anyone from AIG or its representatives? A. No.” 228:17–20.

“Q. [D]o you remember ever discussing with Mr. Swift or with Ms. Hamstra the concept of what additional rights are going to be transferring with the securities into ML II? A. I don’t think I ever discussed with them that question. That would have been taking us far, far, far from the standard conversations we were having about which securities would be transferred, what date, all the business questions that we were being asked. So, our conversations did not get into questions like that.” 245:7–19.

• No discussions about transferring fraud claims with anyone at the FRBNY. “Q. Do you remember ever discussing that internally with anybody at the New

York Fed, that as part of this transaction, We should be telling AIG or asking AIG, Hey, we want you to assign to us any tort claims that you might have against the bank counterparties that initially sold you this RMBS? A. I recall no such conversations.” 80:24–81:8.

“A. [O]ur general direction, general stance had been to derisk the company, and we would take the downside risk; but as protection of that, we would get all the protections associated with that. But we had no conversations specifically about tort claims.” 82:4–10.

“Q. When you say ‘we had no conversations specifically about tort claims’, you’re talking about even internally at the New York Fed, correct? A. I was not involved in any conversations that talked about those tort claims.” 82:11–82:17.

“Q. Did you ever have discussions, through the creation of ML II, a discussion with anyone within the New York Fed about seeking to obtain or receive from AIG its rights to pursue tort or fraud claims—tort or fraud claims against the banks that sold it the RMBS securities that were being sold to ML II? A. Not—not until late 2012 when I was asked by legal counsel what my interpretation of those transfers were.” 84:10–20.

“Q. Did you ever have a discussion with Ms. Dahlgren about the New York Fed acquiring from AIG the rights to pursue recoveries against the banks that sold AIG the securities that were being sold to Maiden Lane II? [Objection] A. No, I did not have any conversations with Sarah Dahlgren about that topic.” 100:5–15.

“Q. How about Mr. Manzari, same question? [Objection] A. Same answer.” 100:16–19.

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“Q. Am I correct that at no time prior to the closing of the ML II transaction did you, James Mahoney . . . specifically consider an assignment of AIG’s tort claims from AIG to ML II? [Objection] A. Well, given that I couldn’t define exactly what a tort claim is, I would have to answer that no . . . .” 118:25–119:21

“A. The transfer of litigation rights, to the extent that that’s something particular, I was really just concerned about moving all the upside and recourse over to the Fed. I didn’t contemplate taking something away . . . .” 129:8–15.

“A. Right. And so I do not have in my mind, I don’t believe the business side had in its mind that if there was a legitimate claim, that [AIG] couldn’t pursue it.” 126:16–19.

“Q. And you also didn’t have any conversations, you personally, with anyone within the New York Fed that AIG was giving up those rights, correct, sir? [Objection] A. That is correct.” 124:13–19.

“Q. After the legal documentation had been executed . . . creating Maiden Lane II, the structure and the APA itself, did you discuss with anyone at the New York Fed, including its advisers, in other words, did you say to them in words and substance . . . Hey, by the way, I just want to know, did we or how did we effect a transfer of AIG’s rights to assert claims? A. No. [Objection] Q. That never came up, did it? A. That never came up in the months subsequent to the—a transaction.” 136:22–137:14.

• No discussions about transferring fraud claims with anyone who met with the Federal Reserve Board of Governors.

“A. I was part of one preparation for the presentation, but not any involvement with the direct Board of Governors, the seven-member Board of Governors, no. . . . In the preps for it, I was.” 83:11–20.

“Q. In the preps . . . do you recall there being any discussion with people on behalf of the New York Fed who would be meeting with the Board of Governors about seeking to obtain or receive from AIG its right to pursue tort or fraud claims against the banks that sold it the RMBS securities? A. No.” 83:21–84:6.

“Q. Do you recall ever saying to any of the staff members at the Board of Governors with whom you spoke in the fall of 2008, up until closing of ML II, about the idea or the issue of receiving from AIG an assignment or transfer of AIG’s rights to seek recoveries for the losses it was about to undertake in connection with the Maiden Lane II transaction? A. No.” 296:20–297:5.

• No discussions about transferring fraud claims with any of the FRBNY’s advisors.

“A. I had no specific conversations with lawyers about any particular terminology—legal terminology, tort claims, or litigation claims—related to that.” 81:23–82:3.

“Q. And did you have any specific conversations on tort claims or assignment of tort claims with your advisers, any of them? A. I don’t recall. I don’t recall any.” 82:22–83:2.

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“Q. Am I correct that you don’t recall ever having a discussion with any of your advisers in which you instructed the advisers to seek an assignment of AIG’s fraud and tort claims? [Objection] A. I’m not aware of that.” 89:13–22.

“Q. And you also didn’t direct any adv[is]ers to effect the transaction in a way that would result in AIG giving up those rights of recovery, correct, sir? A. There was no specific direction to someone about any type of claim like that.” 124:20–25.

“Q. Did you ever have a discussion with BlackRock—now I’m asking in the period post-closing of ML II . . . where you on the one hand, and BlackRock on the other hand, discussed the issue of whether AIG had assigned or given up its tort or fraud claims to ML II? [Objection] A. No. No.” 150:7–17.

“[Referring to Morgan Stanley presentation] Q. [Morgan Stanley] w[as] advising the New York Fed on . . . the structure for the ML II transaction? A. Yes. . . . Q. And am I correct that what it shows in the lower half is, from the AIG’s insurance companies, whether a sec lending pool, what’s being transferred to ML II is $40 billion par face amount of residential mortgage-backed securities; do you see that, sir? A. Yes, I do. . . . Q. [W]ould you confirm for me, sir, that in Exhibit 6A, there is no indication at all of AIG transferring or assigning away any rights that it may have in connection with seeking recoveries for the losses on the residential mortgage-backed securities it was selling to ML II? [Objection] A. That is true . . . .” 230:2–233:12.

• No discussions with anyone about transferring fraud claims. “Q. Okay. And at any point in time . . . after the consummation of Maiden Lane II

. . . do you recall ever discussing with anyone the concept of, Hey, don’t worry, because if these securities go down in value, we have AIG’s claims that we can pursue against the banks? A. No, I don’t recall having any such conversations.” 137:15–25.

“Q. [B]ut at the time . . . you were unaware of any actual claims that may have existed, correct? A. We had no specific knowledge of any claims that were in the making; we had no specific knowledge of any reasons why there was something special―’special’ in the negative sense―about these issues. That’s right.” 65:10–19.

“Q. At the time in 2008 that ML II was being consummated, you weren’t even thinking about the concept that AIG may have had tort claims against particular entities that sold it the security? A. Right . . . We didn’t think, Wow, that’s got a lot of value there, and we want that transferred to us; we have a lot of value there.” 133:10–134:8.

• No documents discussing transferring fraud claims. “Q. [Referring to BlackRock presentation] [Y]ou would agree with me, Mr.

Mahoney, there is no reference at least here in this document to a . . . in the page we’re looking at in terms of objectives and structure, there is no reference here to the ML II or the New York Fed seeking to obtain AIG’s rights to pursue

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recoveries with respect to the $18 billion in losses that AIG was going to ultimately be realizing? [Objection] A. That’s correct. There is no reference on this page to that. Q. Are you aware of a reference to that effect on any document that you’ve seen anywhere? A. No.” 200:4–19.

“Q. Do you know whether there’s a document in existence or that has ever been in existence in which the New York Fed has stated publicly that it believes that it acquired from AIG, AIG’s fraud or tort claims with respect to the residential mortgage-backed securities that were sold into ML II? [Objection] A. No. Q. Have you ever seen any such statement to that effect by the New York Fed? A. No. Q. . . . Have you ever seen a non-public statement to that effect? [Objection] A. No.” 248:18–249:22.

Mahoney testified that he did not understand the term “Related Instruments” to include litigation claims.

• “Q. In that respect, the terms RMBS . . . we’re focused on the words ‘Related Instruments.’ Do you recall in 2008 having discussions with anyone at AIG as to what that provision in the APA meant? A. No. . . . [T]he legal documents were drafted by legal counsel, outside counsel. And I would not have gotten involved in those types of discussions with AIG, with members of AIG or AIG’s counsel. Q. . . . Do you remember discussing what the phrase or term ‘Related Instruments’, the defined term in the Asset Purchase Agreement, meant with anyone internally at the New York Fed? A. No, I do not. Q. And how about with respect to your outside advisers? Do you remember discussing it with any of your outside advisers, legal or banking or accounting advisers? A. No.” 50:9–51:8.

• “Q. [] Is it fair to say you also don’t recall spending any time in 2008 focused on that provision, ‘Related Instruments’, as the Maiden Lane transaction was being consummated? [Objection] A. It would be fair to say I did not focus on that. I read the legal documents more for things that contradicted my understanding of what should be in it. But . . . it’s a pretty involved definition that I would interpret has meanings beyond a laymen’s interpretation of those meanings. So, I did not probe, it would have taken too long to probe every single thing I didn’t fully understand.” 51:9–52:2.

• “A. For example, when I first read of ‘related instruments,’ I thought of derivative contracts, maybe interest rate swaps or FX swaps that are related to the RMBS. Because CDOs, for example, do have embedded derivative contracts.” 37:20–25.

• “A. From a business perspective reading this, you would think that this would include the legal documentation and the governance supporting that is being transferred in the purchase of these assets over to Maiden Lane II.” 159:7–12.

• “Q. [D]o you recall the issue of ‘Related Instruments’, or the definition of ‘Related Instruments’, ever being the subject of any discussion . . . irrespective of whether you ever partook in it, being the subject of any discussion between AIG on the one hand and the New York Fed on the other? [Objection] A. So, there were a lot of conversations that I was not privy to. But no, I’m not familiar with any . . . conversations with third parties.” 52:12–53:3.

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• “Q. Which provisions of the legal contracts at issue in this case do you believe have ambiguity? [Objection] A. So, I think this revolves . . . around the ‘Related Instruments.’ . . . So, this term ‘Related Instruments’ is supposed to be more broad, more comprehensive. But if you read it, it doesn’t say tort claims; it doesn’t say litigation claims. So was that the intent or not?” 134:19–135:20.

• “Q. Do you have any recollection of having considered that question . . . in 2008? That is, what are we referring to here when we’re talking about these various documents within—the definition of ‘Related Instruments’? Do you have any recollection of considering that question in 2008? [Objection] A. In 2008, I wouldn’t necessarily have tied—I certainly don’t recall, tying the language in this definition with the transfer of those types of rights, litigation or tort rights.” 159:17–160:9.

In fact, Mahoney could identify no provision in the contracts that transfers AIG’s litigation claims.

• “A. But when I read this, the ‘Related Instruments’ definition, I doubt very much at the time I was thinking, Oh, that’s where we’re going to get these nonstandard rights transferred to us. Q. Okay. Do you remember thinking any other provision in the APA which did, to your . . . understanding at that time, affect those nonstandard transfer of rights to you? A. No.” 160:22–161:10.

Mahoney testified that no premium was paid to AIG for the transfer of litigation claims.

• “Q. And before the Fed, as a matter of law, could lend nearly $20 [b]illion to ML II, what did the Fed have to do to assure itself that there was adequate security for that loan? [Objection] A. Well, the 13(3) clause is that the Reserve Bank has to be secure to its satisfaction in the collateral that supports the loan. So, that’s why we spend a lot of resources to ensure that the collateral had the value we were ascribing to it that could support the loan. Q. And you did a lot of work using outside advisers to come to that conclusion? A. That’s right. We hired a set of outside advisers with legal counsel as well as three different types of advisers externally to support that.” 70:10–71:5.

• “Q. And is it correct that the valuations that were arrived at by BlackRock were arrived at by projecting the future cash flows from the underlying mortgages in each of the residential mortgage-backed securities? A. That’s correct. So, it was estimated future cash flows based on how similar RMBS performed to term. Q. And other than using future cash flows in arriving at a valuation, was there anything else that was done in terms of arriving at what would be paid by Maiden Lane II to AIG for each of these securities? A. So, that’s what we relied upon.” 77:20–78:10.

• “Q. Am I correct, sir, that in terms of the values, those—that BlackRock came up with, those became the actual prices at which the RMBS were sold? A. Those became the prices at which the RMBS were sold into the vehicle. Q. And am I correct that there was no particular price or value that was associated with the surrendering or giving up of any rights AIG might have had to seek recovery on the $18 billion of losses that it suffered? [Objection] A. Right. . . . [T]he price estimates were based solely on the cash flows generated by the securities in―were purchased into the vehicle.” 78:22–79:14.

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• “Q. So, is it correct, sir, that there was no value or price associated with any tort claim that AIG may have been giving up? [Objection] . . . A. [T]here was no premium added on to the prices above and beyond the estimated cash flows discounted back. . . . That’s correct.” 79:19–80:17.

Mahoney testified that, when he sent a March 12, 2012 Letter advising AIG that the “RMBS Issue” had been disposed of, he was referring to the securities—and nothing else.

• “Q. [T]he circumstances or the reasons for this letter, Exhibit 32, March 12, 2012, is it correct to say this was advising AIG of the fact that the New York Fed had sold off all of the residential mortgage-backed securities that were owned by ML II? [Objection] A. Right. In my understanding, this was a letter to AIG to inform them of developments―material developments on the vehicle which they owned a billion dollars stake in. So, I believe that was the intent of the letter. It was addressed to AIG from, effectively, the Maiden Lane II vehicle.” 30:12–31:2.

• Q. [] If you turn to the second page, you will see that at the top of the second page, it says, ‘Recognizing that all the RMBS Issues have been disposed of.’ . . . And do you see that that ‘RMBS Issues’ is a capitalized term? A. Yes, I do. Q. And do you understand that it is the capitalized term to mean the definition that’s found in the Credit Agreement and the Asset Purchase Agreement for Maiden Lane II? A. In my mind, I didn’t jump to look up for a definition of that. I thought it was not a legal term but, rather, a business term, the ‘RMBS issues.’ I understood it to be, as I said earlier, the 855 CUSIPs or issues that were bought into the AIG—Maiden Lane II vehicle. Q. All right. So, your understanding of the statement that ‘all the RMBS Issues have been disposed of’, was a statement that said that all of the 855 CUSIPs for the residential mortgage-backed securities had now been disposed of, sold? A. Sold. Q. Am I correct, though, on the preface to my statement? A. That all hundred―855 RMBS, what I’ll call CUSIPs, have been sold to external parties for cash receipt into the vehicle.” 31:3–32:11.

• “Q. Okay. Did you understand that statement regarding RMBS Issues in any way related to tort claims that the Maiden Lane II vehicle may or may not have owned? A. I would not have jumped to that, that statement. I looked at that more from a business perspective. . . . The RMBS issues, CUSIPs, had been sold.” 32:12–21.

• “Q. [Referring to the letter] [I]t was presented to you to sign on behalf of Maiden Lane II because you had historical knowledge of Maiden Lane II from the 2008 time frame; is that fair? A. That’s right. The institutional knowledge from the original Maiden Lane vehicle set-up. Q. And before you signed, did you, i[n] fact, review this letter carefully to make sure that any statements in it that related to that historical knowledge were, in fact, accurate? A. That’s really what I would be reviewing this letter for. Anything subsequent to my involvement in the origination of Maiden Lane II, I would be relying on my internal counsel to verify the accuracy of those statements. But I was looking at it for anything that would contradict, in my mind, things that I knew to be factual.” 29:9–30:5.

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Mahoney never saw the Settlement Agreement between Bank of America and ML II, nor discussed intent, prior to signing the declaration in this action.

• “A. And I would be, from the business side, one of the most knowledgeable people about the intent. And so I was asked to sign a statement that I did not draft, but which I carefully reviewed, changed several minor aspects of it including, as I mentioned earlier, the ‘Related Instruments’, specifically having inserted, making reference to the APA because I didn’t want the ambiguity about what ‘Related Instruments’ meant. So, I believe that’s why I was asked to sign it. Because I was, from the business side, the person most knowledgeable about the transfer.” 99:6–20.

• “Q. Were you ever asked to make a statement about what you understood AIG intended? A. I don’t think I was ever asked to make such a statement, and I didn’t. Q. You wouldn’t have any basis to, would you? A. Right. Again, crafting those legal documents were a lot of discussions that were outside my personal knowledge, so I could say what my personal knowledge was but I wouldn’t be able to represent AIG’s perspective or their intent.” 106:2–14.

• “Q. So just, again, to break that down. Until having been shown the capitalized term ‘Related Instruments’, you had a business understanding of what ‘related instruments,’ small r, small i, meant, correct, sir? A. Right. My interpretation reading the Declaration, the original draft Declaration, my mind went to the business interpretation of that phrase. If you would see that in the Wall Street Journal article, for example, you’d be thinking about related financial instruments. Q. Right. And your understanding of related financial instruments for residential mortgage-backed securities would be what? A. It would be something like an—an interest rate swap contract, which would convert a floating rate to a fixed rate or vice versa, help him to help you manage the interest rate risk on a residential mortgage-backed securities.” 43:15–44:12.

• “Q. But is it also true that prior to being shown the term ‘Related Instruments’ in December 2012, in connection with your Declaration, you didn’t have a recollection of having actually focused on the definition of that term in the APA? A. So, right, in December 2012, I don’t remember having focused on that term in 2008.” 108:20–109:4.

• “Q. You said that you didn’t draft your Declaration but you reviewed it. Do you know who drafted it? A. I do not.” 101:21–24.

• “Q. [] And how many drafts of the Declaration do you think it went through before you were prepared to sign it? A. So, I don’t know how many drafts it went before the original draft was given to me. There was a single set of cha[nges] to the . . . document. Q. Just one time you made changes and then it was to your satisfaction? A. That’s correct.” 102:10–21.

• “A. So when I got―yes, so when I got the draft, it was consistent with the conversation and―with the exception of a couple of point which were adjusted, and I was willing to sign it at that point. Q. Who was that conversation with? A. Our internal legal counsel. . . . Q. And how long did that conversation last? A. It was a short conversation. . . . It was less than 10 minutes, let’s say. It was really about

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what was the intent; I expressed the intent. There was some question at some point, either by e-mail or phone, ‘Would you be willing to sign a declaration to that?’ I said, ‘Well, I have to review it first’, which I did. Certain aspects of it were adjusted, and I was willing to sign it . . . based on the agreement of the words on the page with my understanding of my intent at that time.” 184:3–185:9.

• “[Referring to the Settlement Agreement between Bank of America and Maiden Lane II] Q. Have you ever seen this document before? . . . A. No, I am not familiar with this document. Q. All right. So, is it your testimony that prior to right now, today, you’ve never seen this before? A. That’s correct. Q. And I take it you had no role in negotiating any type of a settlement with Countrywide at any point in time? A. That is correct.” 100:20–101:20.

• “Q. But prior to December 2012, in connection with your Declaration, had you ever been consulted by anyone at the New York Fed to provide any view as to what was or was not intended at the time Maiden Lane II had been entered into? A. . . . I don’t recall that happening before then.” 105:14–25.

• “Q. Other that what you told us . . . occurred in December of 2012 when you were sent a draft of a declaration, and then you were asked to review it and you felt comfortable signing it, between 2008 and that event in 2012, did anyone ever come speak with you or question you about what was intended back in 2008 in respect of the assignment or transfer of any rights that AIG might otherwise have had? . . . So, I’m omitting the point where you get the Declaration. A. I understand. I don’t recall anyone asking me about that . . . prior to that.” 181:8–182:2.

Mahoney testified that neither the FRBNY nor its advisors ever considered bringing fraud claims.

• “Q. And what role did BlackRock play in relation to Maiden Lane II and its assets? [Objection] A. They were under contract with the Federal Reserve Bank of New York, so via the Maiden Lane vehicle, to manage the assets held in the three Maiden Lane vehicles.” 22:21–23:5.

• “Q. Were you aware, for example, when―as of May 2010, that one of the things that BlackRock was pursuing was remedies against IMPAC and certain underwriters because of discrepancies in the governing transaction documentation? A. . . . I was aware that BlackRock was aggressively purs[u]ing a variety of ways of maximizing cash flows that included a very close read of all of the documents related to the underlying transaction, and where discrepancies were identified to seek recourse or resolution to those discrepancies.” 147:19–148:11.

• “Q. Do you have an understanding today of what type of legal claims at any point in time BlackRock was pursuing or attempting to pursue to try to maximize cash flow recoveries? A. As I said, they were aggressively pursuing a variety of different avenues to ensure we were getting all of our expected rights, cash flows, title and interest and, in fact, in addition to not overpaying for services that service providers provided.” 164:25–165:11.

• “Q. To the extent that Maiden Lane II’s advisers, legal and nonlegal[,] believed or came to understand that Maiden Lane II had received an assignment of AIG’s tort claims[,] was

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it your expectation that those advisers would be exploring ways to pursue those claims? A. Yes.” 168:3–16.

• “Q. Am I correct that through the period of early 2011, which is when you told us the Investment Committee dissolved, you’re not aware of any discussions with or among ML II’s advisers about pursuing recoveries with respect to any AIG assigned tort claims? [Objection] A. I am not aware of any such discussion.” 169:14–24.

Mahoney testified that the FRBNY created ML II in order to secure AIG’s ongoing viability.

• “Q. And you agree that it was not the purpose of the New York Fed to try to make a profit in connection with ML II? A. . . . [W]e did not have a profit motive in entering into Maiden Lane II.” 120:24–25.

• “Q. . . . Was it your view—First of all, was the restructuring done at least in part to assist AIG in avoiding a ratings downgrade? A. It was responsive to the concerns of a variety of [stake] holders. And important [stake] holders there were the credit rating agencies.” 282:21–283:6.

• “Q. But at that point in time, you believed that those four components of the restructuring— A.—avoided a near term downgrade by the rating agencies, yes. Q. And did you believe that, at least in the near term, it assured AIG’s viability? A. In the near term, yes. Q. And then you’re saying that there was always risk and you didn’t know what the future had in store, but at least at that point in time, you believed it was sufficient for AIG to continue as a going concern, correct? A. Going concern. Q. And to be a viable entity, correct? A. Right.” 283:14–284:7.

• “Q. And you agree that it was not the purpose of the New York Fed to try to make a profit in connection with ML II? A. We have policy objectives in creating the instrument. The LIBOR plus 100 interest rate would be a low interest rate relative to what a private sector institution would require for the risk that were being obtained. So, we did not have a profit motive in entering into Maiden Lane II.” 120:15–25.

Mahoney testified that the FRBNY’s loan to ML II was always extremely likely to be repaid.

• “Q. And is it true, sir, that all of those outside advisers, after evaluating the collateral, their conclusions were that the New York Fed was unlikely to take any losses on the loan even in severe stress scenarios? [Objection] A. That is the conclusion that our advisers arrived at, communicated to us, and which we understood.” 71:6–14.

• “Q. And in all of those instances, all of your advisers—in other words, in all of those scenario, stress test scenarios, your advisers’ conclusions were that, even under the worse stress case scenario that they used, their model showed that the Fed’s loan would be repaid in full, correct, sir? A. That is the results of their modelling, yes.” 72:2–10.

• “Q. [Referring to BlackRock presentation] [I]t says ‘Very low likelihood of failing to repay senior debt (P&I)’—principal and interest—’even under extremely severe stress scenarios.’ Do you see that? A. Yes, I do. Q. And that was BlackRock’s view at the time, correct? A. So, it was their view at the time, but maybe you can reinterpret that that was their direction to structure something that would pay off the Federal Reserve principal plus interest even under extremely stressed scenarios. Q. And is it

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your understanding that it was their view or it was their instruction, or both? A. Both.” 194:24–195:18.

• “Q. [D]o you think that that view of . . . BlackRock . . . that there was a very low likelihood of failing to repay the senior debt, including principal and interest even under extremely severe stress scenarios, remained all the way through the closing of ML II in December? A. I would say that’s true in the way they modelled it.” 195:19–196:6.

• “Q. And then it says, ‘Results at very low likelihood of failing to repay the senior debt even under severe stress scenarios.’ That was the view. I understand it may have been based upon the advisers’ model, but that was the view, at least as of October 25, 2008, within the New York Fed? A. Right. That was—we did believe that the models were—the bases for our pricing and bases for our feeling that the loan was secured to our satisfaction.” 213:11–21.

• “Q. At any point in time, did BlackRock advise the New York Fed, even in that period in the next quarter, did BlackRock or any of the Feds advisers advi[s]e the New York Fed that the prior conclusions, which were that the loan would be repaid in full, had changed? A. So, we were provided in each quarter, in the type of analyses that we discussed this morning, that quarterly BlackRock decks on Maiden Lane II and III; each quarter revised a new estimated date on which the loan would be repaid. And [in] the base case, we were always going to be repaid; and under the adverse conditions, we would also be repaid.” 292:20–293:11.

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