From the Hoss's Mouth
Hoss Cents Free Financial Money Magazine watched with interest yesterday (March 24, 2009) as Treasury Secretary Timothy Geithner, Federal Reserve Chairman Ben Bernanke, and President of the Federal Reserve Bank of New York William Dudley testified before a subcommittee hearing of the House Financial Services Committee. The Hoss was particularly interested in the testimony concerning AIG.
There has been much debate about whether or not AIG should have been permitted to fail. Federal Reserve Chairman Ben Bernanke said, "Its [AIG] failure could have resulted in a 1930s-style global financial and economic meltdown, with catastrophic implications for production, income and jobs."
Mr. Geithner in his opening remarks said, "The collapse of AIG could cause large and unpredictable global losses with systemic consequences—destabilizing already weakened financial markets, further undermining confidence in the economy, and constricting the flow of credit. A disorderly failure of AIG risked deepening and prolonging the current recession."
Let's take a look at the reasons for Mr. Bernanke's and Mr. Geithner's concern.
AIG has 74 million insurance policies in over 130 countries. AIG insures personal items such as your home, car, travel and life. AIG also insures 401Ks that contain stocks, mutual funds, index funds (Dow Industrial Average and S&P 500). AIG insures banks, movies, oil rigs, and airlines including the plane that successfully ditched in the Hudson River.
One of every three Americans work for companies that are either insured by or backed by AIG.
Given this information, The Hoss agrees with Mr. Geithner and Mr. Bernanke that AIG was and is too big to fail. The effect on the economy, American and worldwide, would have been devastating.
In his opening remarks, Mr. Geithner advised the committee that the Administration is going to propose legislation that would give the Federal Reserve powers over non-banking financial institutions similar to those powers the FDIC (Federal Deposit Insurance Cooperation) has over banking institutions. This would be in order to prevent another AIG type collapse.
Hoss Cents Free Financial Magazine agrees with this concept, but reserves judgment until we see the actual legislation.
Complete text of opening statements at the links below.
Statement Geithner
Statement Bernanke
Stay on track,
The Hoss
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"One of every three Americans work for companies that are either insured by or backed by AIG." Should any company be left to grow this big I wonder?
ReplyDeleteTake care, Julie