Oversight of the Federal Government’s Intervention at AIG
March 24th, 2009 by KarinaLast week, the Chairman and CEO of the American International Group (AIG), Edward Liddy, testified before the House Financial Services Subcommittee on Capital Markets, Insurance, and Government Sponsored Enterprises. Today, the committee is holding a second hearing to more thoroughly examine the oversight of the federal government’s intervention at AIG with Treasury Secretary Geithner and Federal Reserve Chairman Bernanke testifying. Watch the live webcast>>
Watch Chairman Frank’s opening remarks:
Chair Frank:
“We need to give somebody somewhere in the Federal government the power to do, when non-bank major financial institutions need to be put out of their misery, we need to give somebody the authority to do what the FDIC can do with banks. It’s called resolving authority, and it’s a form of the bankruptcy power given under the Constitution. It allows us to avoid the choice of all or nothing - nothing in the case of Lehman Brothers, all in the case of AIG - equally unacceptable alternatives, and our job is to work together to find some other way.”
Read prepared testimony:
The Honorable Timothy F. Geithner, Secretary, U.S. Department of the Treasury
The Honorable Ben S. Bernanke, Chairman, Board of Governors of the Federal Reserve System
Mr. William C. Dudley, President and Chief Executive Officer, Federal Reserve Bank of New York
Rep. Carolyn Maloney (D-NY):
Rep. Maloney:
“I received a report from AIG that they presented to our government during this critical time, where they outlined the need for a bailout, they claimed that they were America’s largest insurance company, and if they failed the entire economy would fail, they more or less put a gun to our heads and said ‘If you don’t bail us out, our economy would fail.’ I would put it another way - if we bail out firms every time someone says it, our economy will collapse.”
Rep. Brad Miller(D-NC):
Rep. Miller:
“There’s a concept called the appearance of impropriety, not impropriety, but the appearance of impropriety. [AIG CEO Edward Liddy] was on the board of directors of Goldman Sachs, which had the most exposure to credit default swaps contracts with AIG FP. I am not suggesting that he has personally profited, but there may be a natural tendency to think of the public interest in terms of the interest of people you actually know. And there might be a tendency to think of the public interest and Goldman Sachs’ interest as being more interrelated than other Americans would see them. That appearance is what I’m getting at. Was there not any discussion of whether there was a problem with the appearance?”
Rep. Gary Ackerman (D-NY):
Rep. Ackerman:
“There are regulations and changes that we should be looking at, and one of them should be expressed in a legal or regulatory way that says ‘gimmicks are not financial products.’ Credit default swaps, although they might have some value somewhere, is really not insurance. Looking forward, we should know that AIG is not the only company that used credit default swaps. How big is that market, how many other companies are out there, and are we looking at them and are we going to stop pretending that they’re issuing insurance, and get those products back into the range of reality?”