Geithner and Bernanke Get Grilled on the Hill
Tuesday, March 24, 2009SUSIE GHARIB: The nation's top two economic leaders asked Congress today to give them new powers to deal with failing financial institutions. Treasury Secretary Timothy Geithner and Federal Reserve Chairman Ben Bernanke told lawmakers on Capitol Hill that the AIG crisis showed that the government needs the authority to shut down non-bank institutions to prevent future bailouts. Stephanie Dhue reports.
STEPHANIE DHUE, NIGHTLY BUSINESS REPORT CORRESPONDENT: The Treasury and the Fed both want broader powers to regulate financial institutions, similar to what the FDIC has when it takes over banks. Fed Chairman Ben Bernanke says with that kind of power, things would have been different with AIG.
BEN BERNANKE, FEDERAL RESERVE CHAIRMAN: This bonus issue would not have arisen because all of the contracts could have been adjusted by the conservator.
DHUE: Treasury Geithner defended the bailout of the insurance giant as the best way to keep the financial system from further meltdown.
TIMOTHY GEITHNER, TREASURY SECRETARY: We did not act because AIG asked for assistance. We did not act to protect the individual counter parties from the consequences of their default. We did not act to help foreign banks. We acted because in our judgment, the consequences of default for the American people would have been catastrophic.
DHUE: Bernanke and Geithner say they understand the outrage over the AIG bonuses, but they had no better option.
GEITHNER: The choices we faced were very constrained by the fact that these were legal contracts and we're a nation of laws and we have to be very careful about (INAUDIBLE) that which we raise questions about the government intervening with respect to legally valid contracts, but we do have an obligation now to go back and try to recoup those payments and we're going to do that carefully.
DHUE: For the most part, lawmakers kept their verbal guns in their holsters. It seems they had spent most of their outrage on AIG's CEO last week. New York Congressman Gary Ackerman even apologized to AIG employees.
REP. GARY ACKERMAN (D) NEW YORK: We've hurt a lot of otherwise innocent and decent people that just fulfilled their contractual obligations in different parts of some of this massive company having nothing to do with the real problem that took place in the financial product division and we probably owe them an apology.
DHUE: Committee Chairman Barney Frank aimed his harshest criticism at protesters in the room.
REP. BARNEY FRANK, CHAIRMAN, HOUSE FINANCIAL SERVICES COMMITTEE: We're trying to have a serious discussion, which will include as you understand a lot of criticism. We really need people to grow up.
DHUE: While lawmakers outrage was more subdued today, it isn't gone. Even though some AIG executives have returned their bonuses, Senate Majority Leader Harry Reid says the issue isn't over. Stephanie Dhue, NIGHTLY BUSINESS REPORT, Washington.
