The top US economic officials are trying to convince lawmakers to give them unprecedented powers to regulate — and even take over — financial goliaths whose collapse could imperil the entire economy. US President Barack Obama agreed and said he hoped “it doesn’t take too long to convince Congress.”
In a rare joint appearance before a House of Representatives committee, US Treasury Secretary Timothy Geithner and US Federal Reserve Chairman Ben Bernanke on Tuesday sought to channel widespread public outrage over huge bonuses to executives at bailed-out American Insurance Group, Inc (AIG) into support for a regulatory overhaul.
“AIG highlights broad failures of our financial system,” Geithner told the US House Financial Services Committee. “We must ensure that our country never faces this situation again.”
Dealings between Congress and Geithner have been tense at best.
But they were a little more relaxed in the afterglow of Monday’s nearly 500-point surge in the Dow Jones industrials, though the Dow dropped about 116 points on Tuesday. The rise came in large part in response to the administration’s unveiling of a public-private program to buy up to US$1 trillion in bad loans and toxic mortgage-related securities clogging bank balance sheets.
Geithner is expected to lay out more details on the administration’s plan tomorrow when he appears again before the committee. Democrats in the Senate say the administration wants the proposal on taking over non-banks to move separately from the larger financial industry regulatory bill, to get it going more quickly.
At a nationally televised news conference on Tuesday night, Obama put in a plug for the request Geithner made to Congress for extraordinary authority to take over failing companies like AIG, much as the Federal Deposit Insurance Corp (FDIC) now has for banks.
“It is precisely because of the lack of this authority” that AIG’s problems threatened to bring down the entire US economy, Obama said.
The government has given AIG over US$180 billion in bailout funds since it first intervened last Sept. 16. The US now owns nearly 80 percent of the giant insurer.
“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 said.
Both Geithner and Bernanke told the panel they did not become aware of the US$165 million in bonuses to AIG employees until March 10, just days before the payments were made. However, lower-level officials at both agencies were aware of the payments.
Bernanke said it was “highly inappropriate to pay substantial bonuses” in such a situation.
He said he had asked that the payments be stopped but was told that they were mandated by contracts.
“I then asked that suit be filed to prevent the payments,” he said.
But Bernanke said his legal staff counseled against this action “on the grounds that Connecticut law provides for substantial punitive damages if the suit would fail.”
At the House hearing, there were a few pointed exchanges.
Representative Paul Kanjorski, a Democrat, warned Geithner about any requests by the Obama administration for more taxpayer money to support the financial bailouts for companies like AIG.
“I assume that you recognize there’s not an awful lot of sympathy up here to necessarily provide additional funds — not going on the merits of whether the funds are necessary,” he said.
“We recognize it will be extraordinarily difficult,” Geithner said.
Geithner made it clear he believed the treasury secretary should be granted broad powers — after consultation with Federal Reserve officials — to take control of a major financial institution and run it.
Republican Senator Jim Bunning of Kentucky said on Tuesday that Geithner should “be booted out of office” and that Monday’s plan for handling toxic assets was “just another step in the direction of socializing our financial markets.”
AIR SUPPORT: The Ministry of National Defense thanked the US for the delivery, adding that it was an indicator of the White House’s commitment to the Taiwan Relations Act Deputy Minister of National Defense Po Horng-huei (柏鴻輝) and Representative to the US Alexander Yui on Friday attended a delivery ceremony for the first of Taiwan’s long-awaited 66 F-16C/D Block 70 jets at a Lockheed Martin Corp factory in Greenville, South Carolina. “We are so proud to be the global home of the F-16 and to support Taiwan’s air defense capabilities,” US Representative William Timmons wrote on X, alongside a photograph of Taiwanese and US officials at the event. The F-16C/D Block 70 jets Taiwan ordered have the same capabilities as aircraft that had been upgraded to F-16Vs. The batch of Lockheed Martin
GRIDLOCK: The National Fire Agency’s Special Search and Rescue team is on standby to travel to the countries to help out with the rescue effort A powerful earthquake rocked Myanmar and neighboring Thailand yesterday, killing at least three people in Bangkok and burying dozens when a high-rise building under construction collapsed. Footage shared on social media from Myanmar’s second-largest city showed widespread destruction, raising fears that many were trapped under the rubble or killed. The magnitude 7.7 earthquake, with an epicenter near Mandalay in Myanmar, struck at midday and was followed by a strong magnitude 6.4 aftershock. The extent of death, injury and destruction — especially in Myanmar, which is embroiled in a civil war and where information is tightly controlled at the best of times —
Taiwan was ranked the fourth-safest country in the world with a score of 82.9, trailing only Andorra, the United Arab Emirates and Qatar in Numbeo’s Safety Index by Country report. Taiwan’s score improved by 0.1 points compared with last year’s mid-year report, which had Taiwan fourth with a score of 82.8. However, both scores were lower than in last year’s first review, when Taiwan scored 83.3, and are a long way from when Taiwan was named the second-safest country in the world in 2021, scoring 84.8. Taiwan ranked higher than Singapore in ninth with a score of 77.4 and Japan in 10th with
SECURITY RISK: If there is a conflict between China and Taiwan, ‘there would likely be significant consequences to global economic and security interests,’ it said China remains the top military and cyber threat to the US and continues to make progress on capabilities to seize Taiwan, a report by US intelligence agencies said on Tuesday. The report provides an overview of the “collective insights” of top US intelligence agencies about the security threats to the US posed by foreign nations and criminal organizations. In its Annual Threat Assessment, the agencies divided threats facing the US into two broad categories, “nonstate transnational criminals and terrorists” and “major state actors,” with China, Russia, Iran and North Korea named. Of those countries, “China presents the most comprehensive and robust military threat
RSS