AIG failure could have had catastrophic implications: Bernanke
US Federal Reserve Chairman Ben S Bernanke on Tuesday said failure of insurance giant AIG could have resulted in "1930s-style global financial and economic meltdown" with catastrophic implications.
By PTI |
WASHINGTON: US Federal Reserve Chairman Ben S Bernanke on Tuesday said failure of insurance giant AIG could have resulted in "1930s-style global financial and economic meltdown" with catastrophic implications.
AIG has received billions of dollars from the US Federal government since September last year.
The failure of AIG "could have resulted in a 1930s-style global financial and economic meltdown, with catastrophic implications for production, income, and jobs," Bernanke said in his testimony before the US Congress.
The Fed Chief pointed out that he wanted to initiate legal action to stop the payment of retention bonuses at AIG-FP but advised against the same by the legal staff.
He said that it was highly inappropriate to pay substantial bonuses to employees of the division that had been the primary source of AIG's collapse.
"I then asked that suit be filed to prevent the payments. Legal staff counseled against this action, on the grounds that Connecticut law provides for substantial punitive damages if the suit would fail; legal action could thus have the perverse effect of doubling or tripling the financial benefits to the AIG-FP employees," Bernanke noted.
AIG has received billions of dollars from the US Federal government since September last year.
The failure of AIG "could have resulted in a 1930s-style global financial and economic meltdown, with catastrophic implications for production, income, and jobs," Bernanke said in his testimony before the US Congress.
The Fed Chief pointed out that he wanted to initiate legal action to stop the payment of retention bonuses at AIG-FP but advised against the same by the legal staff.
He said that it was highly inappropriate to pay substantial bonuses to employees of the division that had been the primary source of AIG's collapse.
"I then asked that suit be filed to prevent the payments. Legal staff counseled against this action, on the grounds that Connecticut law provides for substantial punitive damages if the suit would fail; legal action could thus have the perverse effect of doubling or tripling the financial benefits to the AIG-FP employees," Bernanke noted.
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