WASHINGTON–Entities that engaged in credit default swaps with American International Group could have transaction details made public, Federal Reserve Chairman Ben Bernanke told a congressional panel yesterday.
His comments came at a House Financial Services Committee hearing, when Rep. Carolyn Maloney, D-N.Y., asked about the possibility of finding out exactly whom AIG engaged in credit default swap transactions with.
“Since the government is now running AIG, we should have full disclosure,” she said. The company has received pledges of $150 billion in government support, and in return has received a 79.9 percent interest in the conglomerate.
Rep. Maloney asked Mr. Bernanke if he was able to “make public the counterparties” as well as the amounts involved in the CDS transactions.
Mr. Bernanke said he thought the Fed could provide the names and amounts involved, but he cautioned against trying to make further use out of that information.
Asked a follow-up question by Rep. Maloney about possibly determining which CDS transactions involved parties with actual exposure and which were “gamblers,” he said the point would be effectively moot.
“I don't think you really could differentiate,” he said. “Moreover, these are legal contracts.” If the government sought to avoid payment to “gamblers” he said, AIG would be in default on those contracts and would enter into a bankruptcy process where those creditors would be paid off anyway.
Such a circumstance, he explained, would be counterproductive to the government's goal of limiting the damage of an AIG collapse that served as the basis for intervention in the first place.
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