The independent overseer of the Troubled Asset Relief Programsays in a new report today that it is essential going forward thatAmerican International Group have a federal consolidatedregulator.

The comments by Christy L. Romero, special inspector general forthe TARP program (SIGTARP), were made in the Office of the SpecialInspector General's quarterly report.

She says in the report that if AIG decides to sell its thrift,then it should still come under federal oversight as a systemicallyimportant financial institution (SIFI).

The SIGTARP report notes that AIG confirmed Oct. 2 in aregulatory filing that it is under consideration as a so-calledSIFI. Romero says this is a “positive step.”

And in a comment to PC360, James Ankner, an AIG spokesman, says,“At AIG we have always been supportive of regulatory oversight bythe Federal Reserve. We expect that oversight to continue.”

Romero says in the report that AIG should have come underfederal regulation when the government's stake in the companydropped below 50 percent in September because it owns a saving andloan, and is therefore subject to consolidated federal regulationby the Federal Reserve Board as a savings and loan holdingcompany.

However, she notes that Robert Benmosche, president and CEO“plans to sell the [company's] thrift.”

Should that sale happen, she says, there would once again be nobanking regulator over AIG's financial business, which continuesoutside the bank.

“Taxpayers still on the hook for billions of dollars for theirTARP investment in AIG deserve to have strong regulation of AIG,whether AIG keeps or sells the bank,” Romero says.

“Taxpayers need to be protected against the potential impact ofany future AIG financial distress on the broader economy based onAIG's size, as one of the largest insurance companies in the world,and interconnectedness,” she adds.