Message: Bailout Money for AIG - where's it all going?
Senators Ask Who Got Money From A.I.G.
Brendan Smialowski for The New York Times
Eric Dinallo, second from right, New York State insurance chief, with an aide before the Senate panel. From left, Donald Kohn, Federal Reserve, and Scott Polakoff, Office of Thrift Supervision. Published: March 5, 2009
(excerpts) WASHINGTON — Trying to draw a line in the sand, a Senate panel told the vice chairman of the Federal Reserve to identify all the parties made whole by the bailout of the American International Group or forget about coming back to ask Congress for more rescue money. The hearing, led by Senator Christopher Dodd, Democrat of Connecticut and chairman of the Senate Banking Committee, was called to examine the regulatory patchwork that had allowed huge risks to build up at A.I.G. Since the insurance conglomerate’s near collapse in September, the federal government has committed $160 billion to keep it afloat. Tens of billions of those dollars have merely passed through A.I.G. to its derivatives trading partners, shielding them from losses. The Fed has refused to provide the names of those financial institutions, and senator after senator, Democrat and Republican, said that was an outrage. “We need to know who benefited, and we’re going to find out,” said Senator Richard C. Shelby, Republican of Alabama and the ranking member of the committee. “The Fed can be secretive for a while but not forever.” Mr. Kohn said the Fed believed that the only hope of recovering the taxpayers’ money was to get A.I.G. back on its feet, doing business as usual — and that meant respecting its customers’ privacy. “I would be very concerned that if we gave out the names, people wouldn’t want to do business with A.I.G.,” he said. But at Senator Dodd’s urging, he agreed to go back to the Fed and ask the other governors to reconsider. “We’re in a new world, and new types of transparency are required,” he said. Committee members also pressed regulators from the Office of Thrift Supervision and the New York State Insurance Department to concede that they were at least partly at fault for failing to prevent A.I.G.’s crisis. A.I.G. came under the Office of Thrift Supervision because it bought a savings and loan in 1999. The conglomerate had assets of more than $1 trillion at its peak, and the savings and loan was worth only about $1 billion. So the transaction forced a guppy to regulate a whale. Mr. Polakoff said one of the first things his office had had to do was identify the regulators of A.I.G. subsidiaries in more than 100 countries and start gathering information from them. The more the office learned about A.I.G., he said, the more it found problems. It tried, with increasing urgency, to work with other regulators, with the A.I.G. corporate board and with the company’s auditor, PricewaterhouseCoopers. Eventually it was joined by the Securities and Exchange Commission and the Justice Department. But by then the die was cast. http://www.nytimes.com/2009/03/06/bu... |
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