SIGTARP: Thrift or No Thrift, AIG Should Be Federally Regulated

The independent overseer of the Troubled Asset Relief Program says in a new report today that it is essential going forward that American International Group have a federal consolidated regulator.

The comments by Christy L. Romero, special inspector general for the TARP program (SIGTARP), were made in the Office of the Special Inspector 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 systemically important financial institution (SIFI).

The SIGTARP report notes that AIG confirmed Oct. 2 in a regulatory filing that it is under consideration as a so-called SIFI. 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 by the Federal Reserve. We expect that oversight to continue.”

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

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 no banking regulator over AIG's financial business, which continues outside the bank.

“Taxpayers still on the hook for billions of dollars for their TARP 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 of any future AIG financial distress on the broader economy based on AIG's size, as one of the largest insurance companies in the world, and interconnectedness,” she adds.