The Federal Reserve said Tuesday it would lend AIG $85 billion to help stave off a worldwide financial crisis. In return, the government received a major stake in the giant insurance company. Two leaders of Senate financial committees say the Fed had no choice.
Judd Gregg (NH), the ranking Republican on the Budget Committee, tells Steve Inskeep that if AIG were allowed to become insolvent, it would create a worldwide meltdown in a variety of areas — specifically for U.S. financial institutions. If the Fed hadn't acted, he says, it would have cost a lot more in the long run.
Christopher Dodd (D-CT), who leads the Banking, Housing and Urban Affairs Committee, agrees that "doing nothing would be even more disastrous." He says the AIG takeover is "sad and tragic," but he believes it's the beginning of the end for the financial crisis, as long as the root cause — the nation's foreclosure problem — is addressed.
Both senators say they see no more government bailouts on the horizon. No other financial entities in trouble meet the standard of Fannie Mae, Freddie Mac or AIG — "that they would melt down the entire system if they went under," Gregg says.
Copyright 2023 NPR. To see more, visit https://www.npr.org.
