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“It was with great reluctance and sadness that I conceded there was no other option” than allowing Lehman to fail, he said.

Asked how the Lehman case differed from that of American International Group Inc., which received $182 billion in taxpayer aid, Bernanke said there was a fundamental difference.

AIG, as the biggest insurance company in the U.S., had valuable assets which could back up the Fed’s emergency loan, he said.

“The Federal Reserve will absolutely be paid back by AIG,” Mr. Bernanke said.