US lawmakers, fed and treasury chiefs angry with AIG

04 March 2009

US Federal Reserve chairman Ben Bernanke voiced his concern over American International Group Inc (AIG) saying that the failure of the insurance giant makes him angry.

"I think if there's a single episode in this entire 18 months that has made me more angry, I can not think of one, than AIG," Bernanke said in a testimony to the senate Budget Committee on Tuesday, after allocating $30 billion government bailout funds to the troubled insurer AIG. (See: US government injects additional $30 billion in AIG).

This is Fed's fourth attempt to stabilise the company since September, taking the total amount to about $160 billion.

However, Bernanke defended the decision, arguing that the insurer's failure may trigger an economic domino effect.

''We know that failure of major financial firms in a financial crisis can be disastrous for the economy,'' Bernanke said. ''We really had no choice.''

AIG reported an industry wide record $61.7 billion Q4FY08 loss, attributing that to losses on their credit default swaps that guarantee mortgage-backed securities. AIG sold these credit default swaps, which supposedly insured about $440 billion in bonds. The latest loss dwarfd the $24.5-billion loss AIG posted in the third quarter, when the government increased its rescue package for the insurer to about $150 billion.