WASHINGTON–Sen. Robert Menendez, D-N.J., asked federal and state regulators today to look into whether American International Group was able to use government bailout monies to engage in unfair price competition.
Mr. Menendez said he wanted financial services regulators to authorize an "independent actuarial evaluation" of the pricing of American International Group's property-casualty products.
In response, New York Insurance Superintendent Eric Dinallo discounted the problem.
Superintendent Dinallo said the issue has been raised by others, "we have reviewed them," and, as a result, have determined that the allegations of unfair competition "are subject to some debate."
Superintendent Dinallo said the issue has been raised by others, "we have reviewed them," and, as a result, have determined that the allegations of unfair competition "are subject to some debate."
Sen. Menendez said $170 billion in federal loans and credit AIG has secured from the federal government concern him because it creates the potential for AIG to underprice its products.
Equally important, he said, is that the underpricing may lead to huge liabilities that in the future its competitors might be forced to assume if AIG can't be stabilized and its insurance units placed in receivership.
He asked, if anyone has done a stress test, similar to the one that large, troubled banking institutions are now undergoing, "to determine the viability of AIG's p-c units?"
Answering the question, Donald Kohn, vice chairman of the Board of Governors of the Federal Reserve System, said that an evaluation of some of AIG's assets has been done, but not a stress test.
While questioning regulators about the AIG situation, Sen. Menendez noted that "the potential cost of bailing out AIG, the cost of systemic risk, has to be quantifiable."
And the next question people are asking, he added is, "when is the fifth bailout of AIG coming, and how much more will it cost us?"
In addition, he said, "We must determine what AIG's assets are really worth."
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