Geithner Calls for More Authority After AIG Mess
In testifying before Congress on Tuesday, Treasury Secretary Timothy Geithner asked for what he called "new resolution authority" to grant the federal government the ability to more successfully take on financial institutions like AIG (ie, non-banks) in the future.
In testifying before Congress on Tuesday, Treasury Secretary Timothy Geithner asked for what he called “new resolution authority” to grant the federal government the ability to more successfully take on financial institutions like AIG (i.e., non-banks) in the future.
Fed Chairman Ben Bernanke supported Geithner’s request and said he’d also tried to halt the AIG bonus bonanza; he’d even considered the lawsuit route but claims that wouldn’t have produced the desired effect and could actually have backfired.
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Geithner said such authority would have allowed the government to bail out AIG last year at a far lower cost to taxpayers, a position backed by Federal Reserve Chairman Ben S. Bernanke. The government currently has the authority to seize only banks.
Testifying before the House Financial Services Committee, Geithner also said Treasury is working with the Justice Department to explore legal avenues to recover AIG retention bonuses that have infuriated taxpayers and raised hackles on Capitol Hill. He said his department will impose on AIG a contractual commitment to pay the Treasury the amount of the retention awards from company operations and will deduct an amount equal to those payments from $30 billion in recently committed capital assistance.
In testimony at the same hearing, Bernanke defended the decision last year to bail out AIG but weighed in against the retention bonuses, saying he had sought to halt them.
The three-hour hearing was marked by several contentious exchanges between lawmakers and the witnesses. Both Republicans and Democrats sharply questioned Geithner and Bernanke about the retention bonuses and the overall bailout. Acknowledging the furor, Geithner said it would be “extraordinarily difficult” for the Obama administration to obtain any more bailout money from Congress.
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