Treasury Asks for New Regulatory AuthorityTreasury Secretary Timothy Geithner asked Congress on Tuesday for new regulatory authority over non-banking entities, including insurance companies such as AIG.
Geithner says this will eliminate gaps in supervision and will avert potentially huge threats to the country's economy and financial system, alluding to the near financial meltdown that could have happened last fall if the government had not stepped in to bail out AIG. The government now owns about 80 percent of the insurance giant.
Geithner says this kind of authority would have allowed the government to bail out AIG last year at a far lower cost to taxpayers, and his position is backed by Federal Reserve Chairman Ben Bernanke. The government currently has the authority to seize only banks. Geithner testified in front of the House Financial Services Committee, and adds Treasury is looking to recover AIG retention bonuses via legal means.
In testimony at the same hearing, Ben Bernanke defended the government's decision to aid the insurance giant with a bailout, and says he was against the retention bonuses and had tried to halt them.
AIG's payment of $165 million in retention bonuses to employees of its financial products division, which was the division that made the risky trades that placed AIG in financial freefall, prompted a virulent outpouring of anger from Congress, the public and even President Obama. The bailout of AIG has been reported as high as $173 billion.
U.S. Durable Goods Orders Jump 3.4 Percent
Signs of a stabilizing economy continue to show themselves in government economic reports. The latest is that orders for U.S. durable goods jumped up in February on a rebound demand for machinery, computers and defense equipment.
The 3.4 percent increase is the biggest gain in more than a year, the first in seven months and follows a 7.3 percent dip in January, according to a Commerce Department report. Without including transportation equipment, orders were up 3.9 percent, the largest gain since August 2005.
This durable goods report combines with reports showing improvements in retail sales, residential construction and existing home sales point to a stabilizing of the economy after shrinking last quarter at the fastest pace in 25 years. Obama administration and Federal Reserve increased efforts to unthaw the credit markets may spur more growth moving forward, analysts predict.