Senate Dems angry over four AIG bailouts

Democrats on the Senate Budget Committee voiced frustration over recent decisions made by the Federal Reserve during a Tuesday morning hearing where they grilled Fed Chairman Ben Bernanke.

Democrats and a few Republicans are irate over the latest infusion of taxpayer money into American International Group Inc. (AIG), which reported a record $62 billion quarterly loss on Monday.

{mosads}The Fed is on track to spend close to $200 billion on the ailing financial conglomerate.

Federal officials announced over the weekend the latest installment in the series of bailouts, an additional $30 billion. The money will come from the $350 billion Congress approved for the Troubled Asset Relief Program (TARP) earlier this year.

This is the fourth time the federal government has intervened to rescue AIG. The newest cash infusion comes on top of a $60 billion loan, $50 billion to purchase toxic assets and $40 billion to purchase preferred shares of stock.

Sen. Ron Wyden (D-Ore.), who chaired the budget committee hearing, accused the Fed of keeping taxpayers “in the dark” about its overall strategy on AIG.

“I hope the fed will come clean in the coming days as to why [the AIG intervention] is so essential,” Wyden told Bernanke.
Bernanke replied that AIG exploited a “huge gap in the regulatory system” and said that he as angry as any lawmaker about AIG’s “huge numbers of irresponsible bets.”

Sen. Patty Murray (D-Ore.) said she was “really troubled by the manner we’re dealing with AIG.”

Murray said it is difficult for families in her state to watch the economy worsen while the government pours billions into AIG, one of the progenitors of the economic crisis, with little evidence of positive results.

Bernanke said that if the federal government failed to act, AIG’s collapse would send damaging shockwaves throughout the global economy.

Sen. Bernie Sanders (Vt.), an Independent who caucuses with Democrats, bashed the Fed for giving out $2.2 trillion in loans to banks with what he characterized as little transparency.

In a heated exchange, Sanders demanded that Bernanke reveal the names of banks receiving those loans.

Bernanke rebuffed the lawmaker, claiming that making such information public would be “counterproductive.” Bernanke and other officials believe the stigma of receiving federal aid would make banks too shy to apply for help.

Sen. Mark Warner (D-Va.) said he is irritated that taxpayers are bailing out entirely all of the investors who made big bets with AIG.

Warner proposed that these counterparties should take a “haircut” loss on their investments because they should have conducted better due diligence research into AIG before entering into deals.

Sen. Jim Bunning (R-Ky.) also criticized the effort to save AIG. Bunning complained that the American people are losing confidence in the Treasury department’s and Fed’s handling of the rescue.