March 18, 2009 1:26 PM

Obama Calls For Greater Regulation On AIG-Like Institutions

By
Brian Montopoli
Topics
Economy
(CBS)
Before departing for California this afternoon, President Obama called for the creation of a "resolution authority" similar to the FDIC that would oversee institutions like AIG and help insure that massive government bailouts of such entities are not needed in the future.

The president said that while the situation with the AIG bonus payouts is troubling, "what I think is also important and just as outrageous is the fact that we find ourselves in a situation where we're having to clean up after AIG's mess."

He said he had just spoken to Financial Services Committee Chair Barney Frank about "giving ourselves tools to prevent ourselves from getting in a situation where an AIG can pose such enormous vulnerabilities to the system as a whole."

"And what we are working on is a resolution authority that would be similar, not identical but similar, to the powers that the FDIC currently has over banks," said the president. "What they're able to do is to, at the same time protect creditors, depositors, and consumers, while also exercising greater power proactively over institutions like AIG which is not a bank which is an insurance company with a hedge fund on top of it."

"It would allow us proactively to get out in front, make sure that we're separating out bad assets from good, dealing with contracts that may be inappropriate, and preventing the kinds of systemic risks that we've seen taking place with AIG," he added.

The president said the effort between the White House and Congress to create such an authority is "part of the broader package of financial regulatory steps that we're going to be taking that ensures that, going forward in the future, we're not going to find ourselves in these kinds of terrible positions again."

Mr. Obama went on to criticize what he called "the culture that these bonuses are a symptom of," which he said has existed "far too long."

The president decried "a situation where excess greed, excess compensation, excess risk taking have all made us vulnerable and left us holding the bag."

"And one of the messages that I want to send is that, as we get out of this crisis, as we work towards getting ourselves out of recession, I hope that Wall Street and the marketplace don't think that we can return to business as usual," he said. "The business models that created a lot of paper wealth but not real wealth in the country and have now resulted in crisis can't be the model for economic growth going forward."

He added that "we have to move beyond a constant bubble-bust mentality and start establishing a foundation for long-term economic growth."

The president also took personal responsibility for the AIG situation and defend Treasury Secretary Timothy Geithner and his economic team. You can read about that aspect of the remarks here.

Add a Comment See all 11 Comments
by nolies74621 March 19, 2009 2:15 AM EDT
Give the man a break! He just inherited a broken system from Bush and is trying to fix it as best and as fast he can.
Posted by deep_throat at 12:13 PM : Mar 18, 2009

No excuse for letting the bonuses go through. Obamas and his staff are holding the purse strings now. Bush is long gone so quit beating that dead horse. Democratic Senator Dodd seemed to have ensured that there was an allotment in the stimulus bill that allowed AIG to pay the bonuses if the contracts were dated before 11 Feb. Place the blame where it belongs, squarely on Obama and the Congress. Bush is'nt controlling anything anymore except maybe your mind since it seems you can't let him go.
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by nolies74621 March 19, 2009 2:10 AM EDT
In contrast to another, recent occupant of the Oval Office, whose nucular grasp of the language left millions laughing..

Posted by alphaa10000 at 12:18 PM : Mar 18, 2009

Good or Bad at least he made me laugh. This new guy has the personality of a wet noodle and he shocks me with the ineptness that he is accepting from his expertly picked White House staff. Geithner....what was he thinking with that pick?
Reply to this comment
by nolies74621 March 19, 2009 2:07 AM EDT
The Person that she be in the hotseat over these bonuses is Sen. Dodd for sneaking that addition into the stimulus bill. You know bonuses will be paid if the contract was before 11 Feb. 09. I bet a dollar the great one new about it too.


Sorry it was meant to read. The person that should be....
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by nolies74621 March 19, 2009 2:05 AM EDT
The Person that she be in the hotseat over these bonuses is Sen. Dodd for sneaking that addition into the stimulus bill. You know bonuses will be paid if the contract was before 11 Feb. 09. I bet a dollar the great one new about it too.
Reply to this comment
by sjc_1 March 18, 2009 3:37 PM EDT
The 1990s law allowed Travelers Insurance and Citibank to merge. Citi would be in worse trouble now if they had not merged. Travelers is a cash cow and is helping them stay afloat.

You do not see Travelers paying off CDS bets to Citibank and others, because they did not do this. It was AIG that was allowed to get too large and play too loose. This is deregulation run amok.
Reply to this comment
by despido March 18, 2009 3:15 PM EDT
"...Fed Injects $1 Trillion to Aid Economy"- AP
+++++++++++++++++++++++
Folks, we just lost another Trillion. Now the FED is expanding the bailouts - now there's a good investment. C'mon Barack - fake some more 'outrage'.
Reply to this comment
by deep_throat March 18, 2009 3:13 PM EDT
Obama knew for a year about these bonuses why all of a sudden there is an outrage?
Posted by Obamanation_X at 11:29 AM : Mar 18, 2009

Huh? What about Bush and Paulson?
They are the ones who gave the bailout to AIG last year.
Shouldn't they have done something about the bonuses?

Obama wasn't even president a year ago or when AIG was given the bailout. Now all of a sudden, all this is Obama's fault?

Republicans seem to have suffered a collective amnesia.
They have forgotten everything that happened prior to Inauguration Day. They keep blaming Obama for the mess the country is in and keep complaining about him not fixing it fast enough.

Give the man a break! He just inherited a broken system from Bush and is trying to fix it as best and as fast he can.
Reply to this comment
by noloyalisti March 18, 2009 3:02 PM EDT
As long as no one tries to blame Obama and the Dems for the sick and twisted, failed pro-corporation policies of the party of war and spending, the Grand Oil Party. Because then they would show us all how ignorant and hypocritical you are.

The failure and the whole mess was started by Ray Gun and put on steroids by the war criminal Bushoccio and his Crime Family.
Reply to this comment
by rbstrcklnd March 18, 2009 2:40 PM EDT
Then when you are perfect -- go at it.
Posted by velma179

*****

Ok Velma, since no one is perfect nor can be, we are supposed to sit by and watch our country go down the toilet?
Reply to this comment
by scb1111_1 March 18, 2009 2:18 PM EDT
Freddie Mac and Fannie Mae will be handing out "bonuses" to their CEOs and executives in August 2009! What is wrong with this picture Mr. President? Barney Frank and Chris Dodd approved those 'bonuses" for their employees and nothing wrong with it, even thought they both took over $200 billions in TARP bailout monies?
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