Geithner Defends AIG Bailout On Capitol Hill

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U.S Treasury Secretary Timothy Geithner defended the Federal Reserve's $62.1 billion dollar bailout of insurer American International Group before the House Committee on Oversight and Government Reform on Wednesday.

In his testimony, Geithner, who was chairman of the New York Federal Reserve at the time of the 2008 bailout, called AIG's rescue "exceptionally difficult and enormously consequential."

The Treasury Secretary said that the steps taken to prop up the struggling firm were motivated solely by the best interests of the American people.

"Action was required," he said. "The world was watching. And the government did not have the luxury of time."

He added, "We acted because the consequences of AIG failing at that time, in those circumstances, would have been catastrophic for our economy and for American families and businesses."

Geithner went on to say that the New York Fed did not act alone in bailing out AIG, stressing that its actions were under the direction of the Federal Reserve Board of Governors and in cooperation with the U.S. government.

The secretary said that the bailout of AIG was essential to confronting the 2008 financial crisis and dampening the damage it caused to the economy and tax payers.

"Government support for AIG and our financial system more broadly will ultimately cost taxpayers far less than many feared," he said. "And importantly, if Congress adopts the President's proposed Financial Responsibility Fee, American taxpayers will not have to pay one cent for the rescue of our financial system."

He added, "Everyone should realize that because of the actions of the Treasury and the Federal Reserve, the American financial system is now in a position where it can provide the credit necessary for economic growth, not stand in its way."

The remarks come one day before Congress votes on whether to confirm Ben Bernanke to a second term as Fed Chairman. The regulatory actions of Bernanke and the Fed have come under increasing scrutiny since the financial crisis, though it is expected that Bernanke will be confirmed.

U.S Treasury Secretary Timothy Geithner defended the Federal Reserve's $62.1 billion dollar bailout of insurer American International Group before the House Committee on Oversight and Government Reform on Wednesday. In his testimony, Geithner, who was chairman of the New York Federal Reserve at the time of the 2008 bailout, called AIG's rescue "exceptionally difficult and enormously consequential." (Market News Provided by RTTNews)