American International Group ( AIG) exploited the fact that there is too little regulatory oversight of complex financial businesses, but its failure would have caused "unnecessary and burdensome losses," Federal Reserve and other officials said Thursday. In a hearing before the U.S. Senate Banking Committee that sought to examine the collapse of AIG, government intervention to save it from complete failure and implications for future regulation, Fed Vice Chairman Donald Kohn said the central bank made "very difficult and uncomfortable decisions" in order to stabilize the struggling insurer. On Monday, the Fed and Treasury Department announced they were increasing the U.S. government's bailout of AIG by $30 billion in additional capital, increasing taxpayer exposure to the firm to $163 billion. "These decisions were particularly difficult and discomforting because they involved addressing systemic problems created largely by poor decision making by the company itself," Kohn said. "Moreover, many of these decisions involved an unregulated business entity that exploited the strength, and threatened the viability, of affiliates that were large, regulated entities in good standing. "However," Kohn added, "uncomfortable as this was, we believe we had no choice if we are to pursue our responsibility for protecting financial stability." Kohn added that the failure of AIG would force losses on many individuals, households and businesses, disrupt financial markets, and greatly increase fear and uncertainty about the viability of financial institutions. "Thus, such a failure would deepen and extend market disruptions and asset price declines, further constrict the flow of credit to households and businesses in the United States and in many of our trading partners, and materially worsen the recession our economy is enduring," Kohn said.