CNN Financial News Producer
Fed Chairman Ben Bernanke wanted to sue AIG in order to prevent $165 million in retention bonuses from landing in the hands of executives from the division that brought the firm to its knees, according to testimony he delivered before the House Financial Services Committee today.
But Bernanke said that he was advised against filing a lawsuit, because the government would have needed to pay "substantial punitive damages" if the Fed lost the case, essentially awarding extra benefits to the executives from the insurance company’s troubled financial products division.
Bernanke and Treasury Secretary Tim Geithner both faced tough questions this morning over the taxpayer bailout of AIG and the bonuses the company shelled out.
Treasury Secretary Tim Geithner is pushing for unprecedented new regulatory powers to seize institutions whose failure would pose serious risks to the U.S. financial system.
With such "resolution authority," the federal government could intervene and aggressively reorganize a troubled business - such as AIG - before its problems ripple through the global financial system, the officials said.
The authority would allow the government to sell or transfer assets and components of a troubled company, including renegotiating or dissolving executive compensation agreements and addressing risky derivatives portfolios.
Geithner will appear before the committee again on Thursday to further discuss the Obama Administration's proposals for regulatory reform.
Meanwhile, 15 executives from AIG have returned their bonuses.
New York Attorney General Andrew Cuomo says that adds up to about $50 million dollars. In all, $165 million dollars was paid out in bonuses earlier this month. Cuomo says he believes his office can recover about half that total and he hopes more employees will return their bonuses on their own.
Stocks on Wall Street are retreating after yesterday’s massive rally.
The Dow posted its biggest point gain of the year on Monday as investors welcome the plan to buy up billions in toxic bank assets and a better-than-expected existing home sales report raised hopes that the economy is stabilizing.
Gas prices rose 1-cent overnight to $1.966 a gallon, the 7th consecutive increase. 14 states and the District of Columbia have regular unleaded gas prices of $2 and higher. 36 states have regular unleaded gas prices below $2. The highest gas prices are in Alaska ($2.487). The cheapest gas prices are in Wyoming ($1.773)
Finally, CNN’s Personal Finance Editor Gerri Willis has some advice for those worried about losing their jobs on how to save on air travel, gyms, clothing and more. Click here for the full story.
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