AIG might get special oversight
WASHINGTON – Bailed-out insurance giant American International Group, whose largely unregulated activities helped trigger the financial crisis, could face special federal oversight as one of a handful of large firms outside the banking system that pose a risk to the nation’s fiscal health if they were to go bankrupt.
The company said Tuesday it had been notified by federal officials that it is being considered for designation as a systemically important financial institution.
The designation, created by the 2010 Dodd-Frank financial reform law, comes with regulatory oversight by the Federal Reserve and tougher “prudential” standards, such as holding more reserve capital.
Bank holding companies with assets of more than $50 billion are automatically designated as systemically important financial institutions, meaning their failure could threaten another financial crisis.
The Financial Stability Oversight Council, a new panel of regulators created by the 2010 law, also can slap the designation on nonbanks.
The government bailed out AIG in September 2008 as the company teetered neared a bankruptcy that could have caused cascading problems through the financial system because it had insured billions of dollars of mortgage-backed securities.