Mr. Bernanke said he believes AIG will repay the government, and that the direct cost to taxpayers for shoring up financial institutions–including AIG–through the Troubled Asset Relief Program would be "really quite small and may, in the end, be in fact a profit."

The Federal Reserve Board loaned AIG $85 billion in September 2008 after the declining value of credit default swaps it had issued to insure mortgage-backed-securities put pressure on the company to give the counterparties more capital.

To collateralize the original loan, AIG gave the Fed 79.9 percent of its stock.

Before AIG began paying back the government by selling off securities and some of its subsidiaries, U.S. taxpayer investment in the firm reached $182 billion.

In his comments about AIG, Mr. Geithner said the company is winding down its Financial Products subsidiary, "where much of that risk was concentrated."

Moreover, he said, the company is working to divest two of its largest foreign insurance subsidiaries, and the proceeds will be used to pay down its loan from the Federal Reserve.

Mr. Geithner added that "AIG's core businesses are generating profits."

The panel, in a June 10 report, said the AIG bailout poses an "extraordinary risk to taxpayers," and questioned whether the government will ever get all its money back.

Rodney Clark, a managing director at Standard & Poor's Rating Services, told the panel AIG would likely need an infusion of private capital to succeed once the government ceased its involvement.

Cliff Gallant, who follows AIG for investment bank Keefe Bruyette and Woods, agreed. He told the oversight panel that AIG common shares are "grossly overvalued," and said AIG "may eventually need to raise significant equity capital from public markets in order to fully stand alone."

SEC ACTION

Meanwhile, the U.S. Securities and Exchange Commission has ended its investigation of AIG and Joseph Cassano, former head of the company's Financial Products unit. No charges were filed.

"We are pleased that the commission–like [the U.S. Department of Justice]–has decided to close its inquiry, which is completely appropriate in light of the facts," said F. Joseph Warin and Jim Walden, attorneys for Mr. Cassano from the firm Gibson Dunn & Crutcher. (The Justice Department closed its investigation last month without filing charges.)

"We think they realized that our client acted in good faith, kept his superiors informed and was honest with investors," the attorneys added.

AIG said it continues "to cooperate with other authorities on their assessment of these events as we focus on strengthening our businesses and repaying America's taxpayers."

Mr. Cassano left AIG in March 2008. Authorities probed the former executive to determine if he and other AIG executives misled investors.

(Additional reporting by Chad Hemenway.)