The government bailout of American International Group Inc. shows the need for “new resolution procedures for systemically important non-bank financial firms” and supervision of “of all systemically important financial firms,” Federal Reserve Board chairman Ben S. Bernanke told Congress yesterday.
“AIG highlights the urgent need for new resolution procedures for systemically important nonbank financial firms. If a federal agency had had such tools on Sept. 16, they could have been used to put AIG into conservatorship or receivership, unwind it slowly, protect policyholders, and impose haircuts on creditors and counterparties as appropriate,” Bernanke told the House Financial Services Committee, according to prepared text of the remarks released by the Fed. “That outcome would have been far preferable to the situation we find ourselves in now.”
