casper
11-19-2009, 06:55 PM
Geithner, under fire, defends AIG bailout
By David Lawder and Emily Kaiser
WASHINGTON - U.S. Treasury Secretary Timothy Geithner defended on Thursday the costly bailout of AIG and urged swift regulatory reform to safeguard the economy from the failure of big financial firms.
Before Congress' Joint Economic Committee Geithner faced fierce criticism of his role in the rescue of insurer American International Group Inc in 2008 when he was president of the New York Federal Reserve Bank.
Representative Kevin Brady, a Republican, called for Geithner's resignation.
Geithner said AIG's failure posed as significant a risk to the economy as the collapse of investment bank Lehman Brothers, which sparked a panic that virtually shut down global trade and threatened to topple the entire financial system.
"The United States of America -- largest financial system in the world, dollar the reserve asset of the entire financial system -- came into this crisis without anything like the basic tools countries need to contain financial panics," he said.
"Coming into AIG, we had basically duct tape and string."
The AIG bailout has been become a symbol of voter outrage over the failings of Wall Street and the government's $700 billion bailout fund, complicating the White House's efforts to get a regulatory reform bill passed.
Congress has been wrangling over how best to revamp financial rules to give the government tools to prevent another crisis, while striking the right balance between clamping down on risky lending and hampering the flow of credit.
The U.S. House of Representatives Financial Services Committee has been working on a bill for weeks, and the Senate Banking Committee kicked off a similar effort on Thursday.
Senator Richard Shelby, the top Republican on the Senate panel, said he would not support a bill put forward by Senator Christopher Dodd, the Democrat who chairs the committee, and called for a "complete rewrite.
NO GOOD CHOICES ON AIG
Geithner said because the United States had no authority to seize and wind down complex financial firms that were in danger of collapse, it had no choice but to step in when the failure of AIG appeared imminent in September 2008.
High unemployment has sparked complaints that Washington was quick to rescue Wall Street but ignored the plight of those who lost their jobs in a recession blamed partly on chancy lending.
"Conservatives agree that as point person you failed. Liberals are growing in that consensus as well," Brady said during a tense exchange with Geithner. "For the sake of our jobs, will you step down from your post?"
In response, Geithner defended the actions he and others in the Obama administration had taken to restore financial calm and economic growth.
By David Lawder and Emily Kaiser
WASHINGTON - U.S. Treasury Secretary Timothy Geithner defended on Thursday the costly bailout of AIG and urged swift regulatory reform to safeguard the economy from the failure of big financial firms.
Before Congress' Joint Economic Committee Geithner faced fierce criticism of his role in the rescue of insurer American International Group Inc in 2008 when he was president of the New York Federal Reserve Bank.
Representative Kevin Brady, a Republican, called for Geithner's resignation.
Geithner said AIG's failure posed as significant a risk to the economy as the collapse of investment bank Lehman Brothers, which sparked a panic that virtually shut down global trade and threatened to topple the entire financial system.
"The United States of America -- largest financial system in the world, dollar the reserve asset of the entire financial system -- came into this crisis without anything like the basic tools countries need to contain financial panics," he said.
"Coming into AIG, we had basically duct tape and string."
The AIG bailout has been become a symbol of voter outrage over the failings of Wall Street and the government's $700 billion bailout fund, complicating the White House's efforts to get a regulatory reform bill passed.
Congress has been wrangling over how best to revamp financial rules to give the government tools to prevent another crisis, while striking the right balance between clamping down on risky lending and hampering the flow of credit.
The U.S. House of Representatives Financial Services Committee has been working on a bill for weeks, and the Senate Banking Committee kicked off a similar effort on Thursday.
Senator Richard Shelby, the top Republican on the Senate panel, said he would not support a bill put forward by Senator Christopher Dodd, the Democrat who chairs the committee, and called for a "complete rewrite.
NO GOOD CHOICES ON AIG
Geithner said because the United States had no authority to seize and wind down complex financial firms that were in danger of collapse, it had no choice but to step in when the failure of AIG appeared imminent in September 2008.
High unemployment has sparked complaints that Washington was quick to rescue Wall Street but ignored the plight of those who lost their jobs in a recession blamed partly on chancy lending.
"Conservatives agree that as point person you failed. Liberals are growing in that consensus as well," Brady said during a tense exchange with Geithner. "For the sake of our jobs, will you step down from your post?"
In response, Geithner defended the actions he and others in the Obama administration had taken to restore financial calm and economic growth.