By Kate Davidson
WASHINGTON--Federal Reserve Chairwoman Janet Yellen said
Wednesday she "strongly" believes the Fed's unprecedented actions
to provide assistance to American International Group Inc. "were
proper, legal and effective."
A federal judge ruled this week that the government violated the
law when it took a controlling stake in AIG in 2008, imposing
"unduly harsh" terms on the firm in comparison to other financial
institutions.
"The Federal Reserve strongly believes that its actions with
respect to AIG in 2008 were legal, proper and effective, and I
believe that they were necessary," Ms. Yellen said.
Ms. Yellen added that the terms "were tough and appropriately so
in order to protect taxpayers from the risks those rescue loans
presented at the time they were made."
Judge Thomas C. Wheeler accepted the government's arguments that
without the Fed's $85 billion loan, the firm would have filed for
bankruptcy and shareholders would have been left with nothing.
Ms. Yellen noted that the 2010 Dodd-Frank law no longer permits
the Fed to intervene to rescue one particular institution, though
it may still administer broad-based emergency lending programs.
Write to Kate Davidson at kate.davidson@wsj.com
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