Want Financial enlarged heads Reach; Points Up AIG need to e
Friday, Mar 27,2009, 2:20:15 PM Click:
25 March 2009 Wednesday FIRST EDITION
SECTION: MONEY; Pg 1B
LENGTH: 412 words
TITLE: Financial leaders want wider scope; AIG points need to expand the powers, they say
Signature: Barbara Hagenbaugh
WASHINGTON - The heads of the Federal Reserve and the Treasury Department urged Congress Tuesday to give the government broad emergency powers to stop financial companies, with AIG as the poster child for that such skills are needed.
Currently, the government can move in the banks not to dismantle in an orderly manner to minimize the damage. But such authority does not exist for non-banks. Who has forced the Federal Reserve to use its emergency powers in a rare last year at the proposal of American International Group. After four interventions, the government has committed to $ 182.5 billion in support and holds a stake of nearly 80% in the insurance giant.
"As we saw with AIG, in great distress, interconnected, non-deposit financial institutions may pose systemic risks as the distress in the banks," Treasury Secretary Timothy Geithner said in the House Financial Services Committee.
The legislature has focused on the issue of 165 million dollars paid to employees of AIG this month. Geithner said the government is working to recover the money and said that as a sanction, the insurer will receive less money from a recently announced $ 30 billion of aid.
"I knew we had a big mess on the side of compensation ... but I did not - I should have, but I did not - a detailed knowledge of those legally contracted retention bonuses", at he said. "It's my responsibility."
AIG CEO Edward Liddy was asked last week, employees of the financial products division, the group that produced massive losses AIG to return at least half of their bonus money. New York Attorney General Andrew Cuomo says the employees have agreed to return approximately $ 50 million.
Last week, the House of Representatives has passed legislation to tax bonuses to certain employees of companies who receive government assistance to 90%, with retroactive effect. Congress and the administration are working to amend the act before it is considered by the Senate. Geithner and Bernanke said the state of their decision to continue to strengthen and support AIG, noting the firm's broad scope.
"In theory, its failure could have resulted in a 1930's style, global financial and economic merger," said Bernanke.
At the hearing, officials said taxpayers get their money from their investment in AIG.
"We are quite confident that we will be reimbursed," Bernanke said, arguing the guarantee issued by AIG was strong. "The taxpayer will actually make money."
Contribute: Pallavi Gogoi in New York
LOAD-DATE: 25 March 2009
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