US Treasury Secretary Timothy Geithner asked Congress for sweeping powers to take control of non-bank financial institutions to avoid the problems the government is having with AIG. Federal Reserve Chairman, Ben Barnanke and Geithner defended their inability to do anything concerning payment of huge bonuses to AIG executives. “These were legal contracts and we’re a nation of laws,” insisted Geithner who warned about government intervening in the sanctity of contracts. Both emphasized the Federal Deposit Insurance Corporation could take over banks but had no legal authority over insurers like AIG. Bernanke said if there was such authority he would have had the FDIC take over AIG. In New York, Attorney General Andrew Cuomo has forced 15 of the top 20 recipients in the United States to return their bonus but he lacks authority to do so in other nations.
The American people are having bailout fatigue and President Obama should understand that most people will not endure more fiascos like the AIG bonus arrangements. There is also increasing concern that AIG used federal money to help foreign banks deal with their problems. Most probably, laws protect foreigners against being compelled to give back money because they are out of the jurisdiction of this nation.
The real question is: what has been learned from this fiasco?