U.S. Senate Panel Sets March 5 Hearing on AIG

By | February 26, 2009

The U.S. Senate Banking Committee has scheduled a hearing on March 5 to examine government aid to insurer American International Group Inc, a source familiar with the hearing said Wednesday.

Federal Reserve Board Vice Chairman Donald Kohn is among several regulators scheduled to testify at the hearing to examine “what went wrong, government intervention and implications for future regulation,” the source said.

Scott Polakoff, acting director of the Office of Thrift Supervision, and Eric Dinallo, superintendent of the New York State Insurance Department, also are slated to testify, the source said.

AIG was first rescued in September after bad mortgage bets left it on the verge of collapse. So far the U.S. government has provided $150 billion in Federal aid to the insurance company.

AIG is one of several companies the U.S. government rescued during tumultuous months for U.S. financial institutions.

The government took control of Fannie Mae and Freddie Mac last year.

Since September the U.S. government has injected capital into other struggling institutions including Bank of America and Citigroup Inc.

In November AIG posted its largest ever loss, hurt by write-downs on assets linked to subprime mortgages and capital losses.

Now, as AIG braces for a fourth-quarter loss that a source familiar with the matter said could be about $60 billion, it may come back for its third round of government help. Such a loss would be the biggest in corporate history.

The company has said it plans to sell all assets except its U.S. property and casualty business, foreign general insurance, and an ownership interest in some foreign life operations, as it looks to raise money to pay back the government.

According to people close to the matter Wednesday, three potential bidders are still looking at buying a large stake in AIG’s key Asian life insurance unit.

Canadian insurer Manulife and Singapore sovereign wealth fund Temasek Holdings are considering offers for the unit, the sources said, although no formal bids have been submitted.

U.K. insurer Prudential Plc is mulling whether to bid, a source said.

Whether to provide an optional federal charter for insurance firms — similar to the duel banking charter system — is being considered by U.S. policymakers.

At the moment insurance companies are regulated by states, most of which set insurance rates. Previously proposed legislation would have allowed insurance companies to set their own rates if they were federally chartered.

Big insurance companies have complained that regulations in various states are inconsistent and have hindered innovation.

Critics fear a federal charter could result in higher rates and chip away at consumer protection.

(Additional reporting by Michael Flaherty in Hong Kong) (Reporting by John Poirier; editing by Jeffrey Benkoe and Carol Bishopric)

Topics Carriers USA Legislation Politics AIG

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