Bernanke Yields To Pressure, Welcomes "Full Review" Of AIG, Copies Boilerplate Language From Prior Testimony
Ben Bernanke has yielded to increasing public pressure to finally disclose all the details surrounding the AIG bailout, and in a letter to Acting Comptroller General Gene Dodaro, Bernanke said he would welcome a full review of the AIG taxpayer bailout by the GAO and will make available "all records and personnel necessary to conduct this review," emphasizing that a review should give taxpayers "the most complete understanding of our decisions and actions." One wonders why stop at AIG? Why not open up the Fed to a GAO audit on all bank bailout activities undertaken in the period commencing with the GSE nationalization, and culminating with the Lehman bankruptcy. Surely that would provide an ever more "most complete" understanding of just who got what and how much taxpayer capital was put just so Wall Street could enjoy another record bonus season.
Amusingly, the mea culpa from the letter was lifted verbatim from a prior testimony by the Fed chief.Mr. Berbanke notes: "The Federal Reserve extended this credit to prevent the immediate disorderly failure of the company, an event that likely would have led to a significant intensification of an already severe financial crisis and a further worsening of global economic conditions."
On March 24, 2009, testifying to the Congressional Committee on Financial Services, Ben said:
“....it was well known in the market that many major financial institutions had large exposures to AIG. Its failure would likely have led financial market participants to pull back even more from commercial and investment banks, and those institutions perceived as weaker would have faced escalating pressure. Recall that these events took place before the passage of the Emergency Economic Stabilization Act, which provided funds that the Treasury used to help stem a global banking panic in October. Consequently, it is unlikely that the failure of additional major firms could have been prevented in the wake of the failure of AIG. At best, the consequences of AIG's failure would have been a significant intensification of an already severe financial crisis and a further worsening of global economic conditions. Conceivably, its failure could have resulted in a 1930s-style global financial and economic meltdown, with catastrophic implications for production, income, and jobs.”
It is good to see that while the Print button at the Federal Reserve is surely working beyond reproach, the Copy-Paste combination is also truly up to snuff. Yet, one wonders, how was the House Committee in March supposed to believe Mr. Bernanke absent all the additional information that has only recently come to light in the subsequent 9 months? And should the general population believe anything that comes out of Fed Chairman's mouth any more without the backing of public evidence supporting each and every claim of the certain "meltdown," going forward. The answer is quite obvious, and is precisely the reason why the Fed will fight to retain its lack of accountability as long as it possibly can.