Geithner calls for broader powers
US treasury secretary says US should be able to seize ailing firms after AIG scandal.
Ben Bernanke, the chairman of the US Federal Reserve, told the panel that the bailout underscored the need for US congress to grant them powers to safely wind down struggling financial giants and subject them to stronger regulatory oversight.
He also told the panel that bailing out AIG was a “difficult but necessary” step to avoid worsening the US recession and said he had wanted to sue to prevent the firm from paying out millions in bonuses, but was talked out of it.
The men’s testimony follows the announcement that 15 out of 20 executives from AIG were to repay their bonuses.
Al Jazeera’s Nick Spicer says Geithner and Bernanke’s comments on new regulation form part of the Obama administration’s overall plan to kickstart the US economy and get people investing but with a “level playing field’ where there is no longer the “anything goes” culture where bankers can do what they want.
It also comes as Barack Obama, the US president, called for “bold, comprehensive and co-ordinated action” to end the global economic downturn on Tuesday, ahead of a news conference in which he aims to explain his recovery strategy to the US public.
Obama also said he hoped it would not take “too long” to convince congress of the need to grant his administration such powers and that the plan was just “one phase” of a broader regulatory framework the administration hoped to put in place to prevent such economic crises happening again.
US stocks rose slightly in afternoon trading, with the Dow Jones Industrial Average gaining 12.82 points, or 0.16 per cent, to hit 7,788.68 points.
AIG scandal
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Andrew Cuomo, the New York attorney general, said on Monday he hopes to recoup $80m of about $165bn in bonus payments paid by the insurer on March 15.
Christina Pretto, an AIG spokeswoman, said a “handful” of senior executives resigned from its financial products unit, which Cuomo blamed last week for bringing the insurer to the brink of collapse.
Cuomo said: “A number of them [employees] have risen to the occasion and I applaud them.”
His office is investigating whether AIG and others broke securities laws by not fully
disclosing information about the award of bonuses to executives for 2008.
The attorney said nine of the firm’s 10 senior executives who received top bonuses have agreed to return them.
Severe criticism
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| AIG’s decision to pay bonuses led to angry protests in the US [AFP] |
Cuomo said he wanted to make public the names and details of those who received bonuses, but was assessing security and privacy of individuals following death threats against some of them.
“Our legal theory is fraudulent conveyance, and we think it is a powerful legal theory,” Cuomo said.
“But if a person returns the money, I don’t think it is in the public interest to name them.”
He added that those people will see their name disappear from his list permanently.
About 400 employees and future employees in AIG’s financial products division received bonuses ranging from $1,000 to nearly $6.5m, with seven employees to receive more than $3m.