- The Washington Times - Friday, March 6, 2009

Regulators overseeing the taxpayer-funded bailout of insurance behemoth American International Group Inc. faced some harsh questions on Capitol Hill on Thursday about where the money is going and who is in charge of the company.

“It’s not clear who we’re rescuing,” said Sen. Christopher J. Dodd, Connecticut Democrat and chairman of the Senate Committee on Banking, Housing and Urban Affairs. “The lack of transparency and accountability through this process has been rather stunning.”

On Monday, AIG reported a loss of $61.7 billion - the worst quarterly performance in U.S. history - and received a new $30 billion loan from the Treasury Department. With the latest installment, the failed company has received promises of more than $170 billion in taxpayer funds, and Treasury now holds an 80 percent stake.

Despite the government’s effective ownership of the firm, Federal Reserve Vice Chairman David Kohn stymied Mr. Dodd by refusing to name companies that benefited from the billions AIG spent to pay out holders of credit default swaps, which it used to insure corporate bonds.

“I would be very concerned that if we … started giving out the name of counterparties here, people wouldn’t want to do business with AIG. We need people to do business with AIG,” Mr. Kohn said.

Mr. Dodd rejected the answer as “unsatisfactory.”

“At a time we need to engender public trust and confidence in these very difficult steps, that kind of an answer undermines that effort very significantly,” he said.

The disgust came from both sides of the aisle, with ranking Republican Sen. Richard C. Shelby of Alabama calling AIG “the greatest corporate failure in American history” and Sen. Jim Bunning, Kentucky Republican, referring to it as “a lost cause.”

“You may come back to us and ask for more money for more banks and more cooperations,” Mr. Bunning said to Mr. Kohn. “You will get the biggest ‘no’ you ever got.”

In justifying its takeover of AIG in September, the Fed argued that the insurer’s involvement in the global economy would have made a bankruptcy catastrophic for both the U.S. economy and its trading partners around the world.

There appeared to some disagreement among regulators about their responsibilities in overseeing AIG, which has multiple divisions including financial products and insurance.

“I think the problem here … is that no one was responsible for the whole company,” Mr. Kohn said. “There was no umbrella regulator over the whole company and there was a piece of the company, financial products, that wasn’t being supervised and regulated by anybody.”

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