U.S. Officials Seek New Regulation Powers

Rep. Barney Frank, D-Mass., the committee chairman, said that "when nonbank major financial institutions need to be put out of their misery, we need to give somebody the authority to do what the FDIC can do with banks."

The government has given AIG more than $180 billion in bailout funds since it first intervened last Sept. 16. The U.S. now owns nearly 80% of the giant insurer.

"If a federal agency had had such tools on Sept. 16, they could have been used to put AIG into conservatorship or receivership, unwind it slowly, protect policyholders and impose haircuts on creditors and counterparties as appropriate," Bernanke said.

Both Geithner and Bernanke told the panel they did not become aware of the $165 million in AIG bonuses until March 10, just days before the payments were made. However, lower-level officials at both agencies were aware of the payments.

At the time of the first AIG bailout, Geithner was the president of the New York Fed, which helped oversee the government intervention.

AIG is a globally interconnected colossus, with 74 million customers and operations in more than 130 countries.

"Its failure could have resulted in a 1930s-style global financial and economic meltdown, with catastrophic implications for production, income and jobs," Bernanke told the panel.

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