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August 13, 2010 Friday
Report finds US financial bailout, foreign rescue efforts had unequal impact
The Congressional Oversight Panel released a report stating that the U.S. government’s $700 billion bailout program had more impact overseas than other countries’ bailout plans had on the U.S.
The Congressional Oversight Panel on Aug. 12 released a report stating that the U.S. government’s $700 billion bailout program had more impact overseas than other countries’ bailout plans had on the U.S.
According to the report, titled “The Global Context and International Effects of the TARP,” while the U.S. government aimed to rescue as many banks as possible, even the ones with substantial overseas operations, other countries focused mostly on banks that often did not have any major operations in the U.S.
“For example, banks in France and Germany were among the greatest beneficiaries of AIG’s rescue, yet the U.S. government bore the entire $70 billion risk” of the American International Group Inc. capital injection program, the panel said in its report. “The U.S. share of this single rescue exceeded the size of France’s entire $35 billion capital injection program and was nearly half the size of Germany’s $133 billion program.”
Although this would have been inevitable in light of the structure of the Troubled Asset Relief Program, the report indicated, the U.S. government might have been able to ask those benefiting countries to share the cost of such rescue, had it had more information about which countries’ companies would receive the most benefit from the U.S. bailout effort.
The panel also urged the Treasury to disclose how TARP and other rescue funds were rechanneled overseas and to document “the impact that the U.S. rescue had overseas.” The panel also emphasized in its report the need to have an international plan to handle the collapse of major, globally significant financial institutions.
“A cross-border resolution regime could establish rules that would permit the orderly resolution of large international institutions, while also encouraging contingency planning and the development of resolution and recovery plans,” the report indicated. “Such a regime could help to avoid the chaos that followed the Lehman bankruptcy, in which foreign claimants struggled to secure priority in the bankruptcy process, and the struggles that preceded the AIG rescue, in which the uncertain effect of bankruptcy on international contracts put the U.S. government under enormous pressure to support the company.”
August 19, 2010