Members of the Senate Banking Committee pressed Federal Reserve Vice Chairman Donald Kohn about why his agency has refused to disclose the trading partners of AIG who have benefited from the government's rescue package, now estimated at about $170 billion. Large sums have been spent by the company to pay off its obligations to other financial firms.  "My judgment would be that giving the names would undermine the stability of the company," Kohn said.  That answer did not sit well with lawmakers.  "Public confidence in what we're doing is at stake, it's their money that is being poured into these institutions," Sen. Christopher J. Dodd (D-Conn.), chairman of the Senate Banking Committee, told Kohn. "That kind of an answer undermines that very significantly."  Sen. Richard C. Shelby (Ala.), the panel's top Republican, called Kohn's explanation "very disturbing."  "If the American taxpayer's money is at stake -- and it is, big time -- I believe the American taxpayers, the people, and this committee, we need to know who benefited, where this money went," Shelby said. "The Fed and the Treasury can be secretive for a while, but we're going to find out."  Senators criticized the federal assistance to AIG, calling the company "a bottomless pit," "a lost cause," and "a very disturbing story of malfeasance, incompetence and greed." They warned Kohn that the administration should not expect another dime from Congress if it does not improve transparency.  "You will get the biggest 'No' you ever got," a red-faced Sen. Jim Bunning (R-Ky.) told Kohn.  Two days after Fed Chairman Ben S. Bernanke expressed personal exasperation with the repeated bailouts of AIG, Kohn did the same.  "These actions have entailed very difficult and uncomfortable decisions for a central bank," he said. But "the failure of AIG would impose unnecessary and burdensome losses on many individuals, households and businesses, disrupt financial markets, and greatly increase fear and uncertainty about the viability of our financial institutions."  Kohn and the other witnesses -- New York Insurance Superintendent Eric R. Dinallo and Scott Polakoff, acting director of the Office of Thrift Supervision -- each cited AIG's Financial Products unit, whose faulty derivative contracts nearly destroyed its parent company last fall.  Polakoff acknowledged that his agency technically was charged with overseeing AIG and its troublesome Financial Products unit. AIG bought a savings and loan in 1999, and subsequently was able to select the OTS its primary regulator. But that left the small agency with the enormous job of overseeing a sprawling company that operated in 130 countries.  "Where OTS fell short, as did others, was in the failure to recognize in time the extent of the liquidity risk to AIG," Polakoff said.  Dinallo insisted that his agency was not responsible for overseeing all of AIG, but rather only the handful of the company's insurance subsidiaries based in New York. That stance drew more ire from Shelby.  "Are you trying to evade your responsibility?" the senator asked. "You can claim here today that you have little responsibility if any for all these problems?"  Dinallo replied that Financial Products had destroyed AIG -- not its insurance businesses -- and that "Financial Products is not a licensed insurance company. It was not regulated by New York State or any other state."
Angry lawmakers yesterday blasted the government's latest bailout of American International Group and threatened to thwart any request to give the troubled insurance giant additional taxpayer money without more transparency into how the funds are being spent.