Bernanke Says Fed Would Welcome ‘Full Review’ of AIG Aid by GAO

January 19, 2010 by · Leave a Comment
Filed under: Policy News 

I applaud this choice but I want to make sure we are clear that there are major questions about giving “back-door bailouts” to Goldman Sachs and a few foreign banks by giving 100 cents on the dollar for credit-default swaps AIG held.  Other counter-parties did take a discount or “haircut” on those debt insurance contracts so there is some explaining to do on those decisions.

To this point both Treasury and the Federal Reserve do not see any problem with their choices on this matter and the amount of U.S. tax payer money they used to bailout this insurance company.  Honestly, the financial products division did not need to be bailout out, their normal insurance operations where is separate subsidiaries so even if that company failed they would still be able to make good on their other obligations.  The reality is that major investment banks and foreign banks did not do proper due diligence on the ability of AIG to make good on this insurance in the event of a economic downturn and they should of been made to pay in a true free market system.

Bloomberg, New York - Federal Reserve Chairman Ben S. Bernanke said the central bank would welcome a “full review” of its aid to American International Group Inc. by congressional auditors and make all necessary records and personnel available to them.

“To afford the public the most complete possible understanding of our decisions and actions in this matter, and to provide a comprehensive response to questions that have been raised by members of Congress, the Federal Reserve would welcome a full review by GAO of all aspects of our involvement in the extension of credit to AIG,” Bernanke said today in a letter to Gene Dodaro, acting head of the Government Accountability Office. The Fed released the letter.

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