REP. BACHUS SAYS WE MUST END AIG-STYLE BAILOUTS

Congressman Spencer Bachus (AL-6) said a federal watchdog report on the tiffany engagement rings bailout shows why the government should never again ask taxpayers to save failing firms.

Bachus, Ranking Member on the House Financial Services Committee, commented on a report by the Special Inspector General for the Troubled Asset Relief Program (SIGTARP) that detailed how the insurance giant's largest counterparties received "backdoor bailouts" while others were left holding the bag and taxpayers assumed massive liabilities. Bachus raised the issue in March when he questioned Treasury Secretary Timothy Geithner at a committee hearing.

Bachus is the author of financial reform legislation that would end government bailouts. He issued the following statement on the report.

"This report paints a devastating picture of a Federal Reserve Bank of New York (FRBNY) that was ill-prepared to deal with the problems at AIG, and failed to fight for what was in the best interest of the taxpayers.

"Even more troubling is the fact that the FRBNY, then under the leadership of Tim Geithner, failed to receive any voluntary concessions by using a strategy that was doomed to fail. thanksgiving day celebration resulted was nothing more than a backdoor bailout of AIG's largest counterparties, both foreign and domestic, at the expense of taxpayers.

"While the Democrats are seeking to codify AIG-style bailouts, the SIGTARP's report confirms that Americans deserve better. That is why Republicans have proposed a solution that protects taxpayers and ends the bailouts. By directing all failed non-banks to an enhanced bankruptcy proceeding, Republicans are ensuring that taxpayers will never again be asked to pay for mistakes on Wall Street."

NOTE: Ranking Member Spencer Bachus sent this letter to Chairman Barney Frank on March 25, 2009 urging Committee hearings to examine the disparity among AIG's counterparty payments.

Bachus also questioned Secretary Tim Geithner during a Committee hearing on March 24, 2009 on whether the FRBNY attempted to obtain "haircuts" from counterparties. During the exchange Geithner informs Bachus that the FRBNY explored "every possible means to reduce the drain on their [thanksgiving teacher gifts] resources." However, the SIGTARP audit report concludes that the New York Fed's policy decisions "came with a cost - they led directly to a negotiating strategy with the counterparties that even then-FRBNY President Geithner acknowledged had little likelihood of success."