Grilled by veteran newscaster Tom Brokaw on MSNBC’s “Meet the Press” on Sept. 21, 2008, U.S. Treasury Secretary Henry M. Paulson Jr. said before the government stepped in with an “$85 billion funding facility” to rescue insurance giant American Insurance Group Inc. last week, that company “was a few hours away from declaring bankruptcy.”
Paulson said in his judgment it would have been “unthinkable” to let that happen. Insisting the failure of AIG never should have occurred, Paulson said the government needed to act in order to protect the taxpayer, adding that situations like the one with AIG are “something we’re going to need to deal with in the future in terms of a regulatory system.”
Paulson called AIG “a hedge fund on top of insurance companies” – a holding company with very little federal oversight that included insurance entities “regulated by 50 different insurance regulators.”
AIG’s global interconnection and its involvement in money market funds and individual savings necessitated the government’s action in order to avoid “a real catastrophe in our financial markets,” Paulson said.
Brokaw asserted that former AIG CEO Hank Greenberg has said for $20 billion he and other company shareholders could save AIG given the opportunity. Greenberg also said at the end of the year AIG “won’t be worth anything because all the good AIG employees will leave if the government takes it over,” Brokaw added.
Paulson quickly dismissed Brokaw’s – and Greenberg’s – comments, stating, “A lot of people are saying a lot of things … and a lot of people want to rewrite history.”
The U.S. Congress and the Treasury Department are working on a $700 billion bailout of the country’s financial system that collapsed largely due to speculation and bad loans in the mortgage industry. In recent weeks, the Treasury has rescued housing finance firms Fannie Mae and Freddie Mac but allowed investment bank Lehman Brothers to fail.
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