New powers for Tim and Ben?
At the congressional hearing on AIG today, Treasury Secretary Tim Geithner and Fed Chairman Ben Bernanke both called for their institutions to have more control over financial companies that aren’t banks. Bernanke testified that if the government had the proper authority last September, AIG could have been put into receivership and regulators could have unwound the company slowly and protected policyholders.
Dealbook live-blogged the hearing, if you’d like to read that.
Some other highlights from the Times coverage:
Geithner said financial crises like those caused by the recklessness of A.I.G. “contain a basic and tragic unfairness – that those who were prudent and responsible in their personal and professional judgments are harmed by the actions of those who were less careful and less prudent.
Bernanke said that he had wanted to sue A.I.G. to prevent the bonus payments but was talked out of it by lawyers who warned that if the lawsuit failed, the government might have to pay double or triple damages in addition to the bonus, since the law in Connecticut, where A.I.G.’s financial services unit has a base, provides for punitive damages if such a suit is unsuccessful.
Ideally, Mr. Bernanke said, he would like to see a business ethic “that links performance and reward appropriately,” and that does not encourage overly risky behavior. “And that was missing in A.I.G.,” he said.
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