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Congress to Hold AIG Hearings: Sound and Fury, Signifying Nothing

Congress should be grateful to American International Group for all the television exposure it has offered. In 2009 there were days of hearings where pink ladies waved signs and legislators with barely room-temperature IQs lambasted Treasury Secretary Tim Geithner.

Representatives who relish the footlights like New York's Edolphus Towns are revving up a revival of the AIG show during the week of January 18, hoping to hang someone's scalp from their belts. Their star performer/witness will be, you guessed it, Geithner.

Just as last year's drama fizzled when most AIG executives refused to return those controversial bonuses, so will this one. No one will be charged. AIG will absorb the punches, as will Geithner, and, in the end, AIG will still owe $60 billion in federal bailout money, with even less chance of paying it back.

The reason for the revival: A Congressman requested emails from AIG and promptly leaked them to Bloomberg News. They showed that officials at the New York Federal Reserve, which shepherded the $182 billion AIG bailout, encouraged AIG officials to keep quiet about AIG's billion dollar payments to major banks that were owed money from AIG's complicated credit default swaps.

"Corruption led to the current economic crisis," says Towns, the chair of the House Oversight and Government Reform Committee, pointing the finger at the New York Fed and Geithner, who led it during the early part of the 2008 financial meltdown.

But does Towns really believe Geithner, or anyone at the Fed, committed a crime? If you are running a public agency, you have to disclose what's going on to the public. But if you work for a multinational corporation, your interest is to keep your business transactions private. Did Macy's tell Gimbels?

The problem is that AIG was a global company that suddenly became a public responsibility with that huge infusion of federal money. It is neither fish nor fowl. It is sui generis, and no one, including Geithner, CEO Robert Benmosche, pay czar Ken Feinberg, insurers who compete against it, and certainly Congress, knows quite how to handle it.

It is the biggest non-bankruptcy bankruptcy in history and it raises questions that have never been asked. How much does it have to disclose? How much should its executives be paid? How can it even fuction, when 435 Senators and Representatives are looking over its shoulder?

The only certainty is that AIG has become a dirty word, which makes it tough on its employees who are still out there trying to sell its insurance products. And every time Congressional representatives open their mouths, it makes it even tougher.