Hearing is on CSPAN3 and the committee thread. In addition to Geithner and Bernanke, the head of the NY Fed, William Dudley, is also here.
For my liveblog on the statements, go here (it’s mostly an excerpt of their statements).
Frank: Begin with Bernanke. First an announcement. We have a lot of members here, important hearing. Wish we didn’t have 5 minute rule, not so many members, wish I could lose weight without dieting. At conclusion of 5 minutes, whoever is speaking will have to finish sentence. Leave time for questions. Not fair to more junior members. I will also gain weight.
Frank: Made last September. When you made decision to intervene, was it in consultation with Paulson?
Bernanke: Yes.
Frank: I remember question of why no foreign participation. Necessity to retain foreign confidence. People who thought we could blow that off got a little start from the PM of China. On the question of compensation, Dudley, I assume you were talking about reforms that go beyond TARP recipients?
Dudley: We have looked at compensation governance at AIG.
Frank: I’m saying are you talking about outside of context of those who receive funding?
Dudley: AIG.
Frank: Bernanke?
Bernanke: Compensation that links reward appropriately, makes sure we don’t get short term for long term outcomes.
Frank: We tried to limit exec compensation, became a partisan issue. Considerable view on Republican side that we should not intervene in terms of compensation. I was please to hear what you said. Compensation that incentivizes top decision makers to take risks unduly is something we’ll return to. Last time that came up partisan debate. Resolution authority, Bernanke, if resolution authority had existed, would AIG have been handled differently.
Bernanke: Receivership or conservatorship. Bonuses could have been adjusted. Haircuts against counterparties. Very similar to way FDIC would handle IndyMac.
Bachus: Geithner, you were in the meetings in September?
Geithner: Yes, I was President of NY Fed.
Bachus: Money to counterparties on October 8.
Geithner: purpose of doing so is to protect the economy. Throughout that period of time, wanted to make sure AIG to meet its commitments.
Bachus: Within about 2 weeks payments made to counterparties.
Geithner: Within hours, technically, within minutes.
Bachus: Over $50 billion of these payments. These parties took a risk, didn’t they?
Geithner: Any insurance contract posed risks.
Bachus: CDS, I guess you can call it insurance. AIG defaulted.
Geithner: Any of the contracts AIG had on insurance.
Bachus: They were paid 100%.
Geithner: Purpose of intervention, AIG was able to meet obligations.
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