By Brandon Moseley
Alabama Political Reporter
Congressman Spencer Bachus (R) from Vestavia said that he was troubled by Wednesday’s report from the Special Inspector General for the Troubled Asset Relief Program (SIGTARP) on AIG’s bailout. Representative Bachus is the Chairman of the House Financial Services Committee.
Chairman Bachus said, “The painful irony of this bailout is that SIGTARP has found that government ownership is actually preventing AIG’s overall operations from being effectively overseen by a primary federal regulator since its hybrid ownership does not fall under a specific legal framework. This is a disservice to taxpayers who were forced to throw more than $150 billion at AIG and underscores why government bailouts are not the answer.
Rep. Bachus said that four years after regulators forced taxpayers to rescue AIG (American International Group) from collapse there has been no progress towards ending the bailout. Bachus says that today AIG owes taxplayers $36 billion and the federal government owns 61% of the insurance giant. Rep. Bachus said in his written statement, “It is imperative for Treasury to map out an exit strategy from AIG’s bailout in order to protect taxpayers.”
According to Rep. Bachus’s statement, “This inspector general’s report shows that regulators have failed to achieve a key objective of AIG’s bailout. Back in 2009, Treasury Secretary Geithner said they would ‘unwind the very business that got us into this situation and return AIG to the business of insurance.’ Yet, AIGFP, the division at the epicenter of AIG’s downfall, remains alive and well, courtesy of the American taxpayer. AIG still has more than 200 subsidiaries. The continued expansive operations of AIG are another nightmare scenario waiting to happen.”
Chairman Bachus said, “Perhaps even worse, in a Financial Services Committee hearing this morning, Secretary Geithner admitted under questioning that no one is actually regulating AIG. Two years after passage of Dodd-Frank, how it is possible that there is no regulator for the biggest TARP recipient of all?”
Representative Bachus said, “Regulators have done a poor job of overseeing AIG. The government’s mismanagement of AIG has enabled both the backdoor bailout of AIG’s counterparties and massive bonuses to employees. The SIGTARP report today shows the management of AIG has not improved, the company remains ‘too big to fail,’ no one is meaningfully watching AIG, and the government is not qualified nor should it assume the task of running one of the nation’s largest insurance companies. Clearly, Treasury must make ending the government bailout and management of AIG a top priority.”
According to their website AIG, “Is a leading international insurance organization serving customers in more than 130 countries. AIG companies serve commercial, institutional, and individual customers through one of the most extensive worldwide property-casualty networks of any insurer. In addition, AIG companies are leading providers of life insurance and retirement services in the United States. AIG common stock is listed on the New York Stock Exchange and the Tokyo Stock Exchange.” AIG was a Dow component stock up until 2008 when the housing collapse showed that AIG had insured derivative investments. The derivatives were bundles of American home mortgages. People and institutions invested in the derivatives believing that they were safe investment and that they were insure by AIG one of the world’s largest insurance companies. When suddenly millions of homeowners stopped paying their mortgages, the derivatives stopped paying interest and their market value plummeted. AIG had wrongly estimated that none of this could happen thus did not have the necessary reserves to make good all of the derivatives they were insuring. The Federal Government led by then Treasury Secretary Hank Paulson (during the Bush administration) stepped in and began bailing out the troubled insurance giant plus many of the nation’s biggest banks. These policies only accelerated under President Obama’s Treasury Secretary Tim Geithner. Proponents of the bailouts argue that they prevented collapse of the major banks and prevented a Depression. Opponents of the bailouts argue that the Treasury borrowed over a $trillion to fund these bailouts and that long term the economy is worse off now than it would have been if free market “boom and bust” capitalism had allowed companies like AIG to crash and burn and then the economy recover naturally.