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Bernanke asks GAO to review Fed role in AIG rescue

WASHINGTON -Federal Reserve Chairman Ben Bernanke took the unusual step Tuesday of asking Congress' investigative arm to conduct a "full review" of the Fed's role in bailing out insurance giant American International Group.

The Fed chief's move is aimed at defusing criticism of the government's $182 billion rescue. The bailout sparked public outrage and demands in Congress for more information, especially after it was revealed that millions in bonuses would go to employees in the AIG division most responsible for the company's need for a bailout.

The House Committee on Oversight and Government Reform has a probe under way that seeks to provide a fuller picture of the AIG bailout. Those lawmakers are especially interested in details involving billions in payments AIG made to Goldman Sachs and other Wall Street firms that did business with the insurer. Some lawmakers want to know why those firms were fully paid and why concessions weren't demanded.

"To provide a comprehensive response to questions that have been raised by members of Congress, the Federal Reserve would welcome a full review by GAO of all aspects of our involvement" in the AIG bailout," Bernanke wrote in a letter to the Government Accountability Office, the investigative arm of Congress.

Bernanke said the Fed already has provided information to Congress on the AIG rescue, has made "a large amount" of information available to the public and provided information to other oversight bodies such as the Special Inspector General for the Trouble Asset Relief Program.

Congress passed a law last year giving the GAO authority to review Fed documents in the AIG bailout. The GAO said Bernanke's request will be weighed against other demands on the agency's staff.

Besides getting money from the $700 billion taxpayer-funded bailout program overseen by the Treasury Department, AIG also was given a $60 billion line of credit from the Fed. The company has tapped around $22 billion.

In the letter, Bernanke said the Fed expects to be "fully repaid" by Sept. 16, 2013 — five years after the first lifeline was thrown to AIG.

Bernanke once again defended the Fed's decision to provide credit to the troubled insurer at the height of the financial crisis in the fall of 2008. AIG's failure — which would have followed the global shock from Lehman Brothers' collapse — "would likely have led to a significant intensification of an already severe financial crisis and a further worsening of global economic conditions," Bernanke said.

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