AIG could have caused a crisis comparable to that of 1930
| Date: March 24, 2009 | Source: Europa Press |
| Category: Business | |
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Loading ... The president of the U.S. Federal Reserve (Fed), Ben S. Bernanke said today that the fall of AIG last September could have caused a crisis "like 1930".
In a rare joint appearance with Treasury Secretary Timothy Geithner before the House Financial Services Committee of the House of Representatives to explain the intervention of AIG, Bernanke said that if the insurer had fallen, others have followed suit, and said that global banks had an exposure of 50,000 million (36.988 million euros).
"AIG highlights the urgent need for new resolution procedures for major institutions outside the banking system," Bernanke said.
On the other hand, the head of U.S. monetary policy recognized that tried to stop the payment of bonuses to executives at AIG, which has received about 170,000 million (EUR 125.593 million) of taxpayers, but gave up when advised by legal counsel of the difficulties the Fed to avoid paying, because in a hypothetical trial, the Fed could have been sentenced to pay even more money to the beneficiaries of these 'bonus'.
"Legal action could have the perverse effect of doubling or tripling the financial benefits for employees of AIG," Bernanke said, who said the U.S. central bank opposes the so-called "retention bonuses" and expressed its willingness to work with the Treasury in recovering them.
Meanwhile, Treasury Secretary Timothy Geithner, echoed Bernanke in affirming the need to improve monitoring rules to "close these gaps," and expressed his "anger" with the fact that such risks have been allowed .
Also, both Geithner and Bernanke before the Committee stressed the need for new powers to allow the closure of systemically important financial institutions in an orderly manner, as the crisis has affected the largest banks, brokerage firms and insurance companies.
