Ben Bernanke finally blew his top on Tuesday (well, spoke very sternly).
Testifying before the Senate Budget Committee he said no other episode during the financial crisis had “made him more angry than AIG.”
He came to the topic after being asked about transparency issues relating to the government’s latest bailout of the insurer, and specifically who AIG’s counterparties were.
In no uncertain terms — Bernanke concluded “AIG was a hedge fund attached to a large and stable insurance company.” He went on:
This is where AIG was particuarly egregious. It took all these large bets effectively insuring the credit risks for all financial institutions. Its failure would have sent shockwaves through the entire insurance industry.
And because there was no legal structure for winding down big financial organisations, Bernanke said they decided it was better to keep them going. The decision though was made with “great regret and trepidation”.
Every objective is now focused on making the company viable enough to sell itself off.
Other choice statements included:
AIG is in a very difficult place. It was a good company but it was ambushed by the products division.
And just in case you missed it:
I’m very angry about the situtaion and i’m very sorry that there were these gaps in financial regulation.
Related links:
AIG’s 2008 loss - FT Alphaville
AIG considers break-up in bid to stay afloat - FT