(CEP News) - U.S. Treasury and Federal Reserve officials share the taxpayers' outrage at bonuses paid by bailed out insurer American International Group, and called for reforms of the U.S. financial system in testimony to the House Financial Services Committee on Tuesday.
AIG's bonus payments were "highly inappropriate", Fed Chairman Ben Bernanke said, calling for better regulation of the U.S. financial system and the Wall Street bonus culture.
Fed Governor William Dudley reminded lawmakers that the Federal Reserve sought to protect the taxpayer's interests, and noted that the U.S. government was legally obligated to respect the firm's right to deliver bonuses.
The fact that AIG managed to pay bonuses despite opposition from the government highlights the need for urgent reforms to the financial system, he said.
Nevertheless, Dudley said the sale of AIG's asset branches should enable the firm to repay its loan from the U.S. government.
U.S. Treasury Secretary Timothy Geithner told lawmakers that the problem of excessive compensation on Wall Street extends beyond AIG.
He also said that reforming the financial system will take time, but remained upbeat that such changes can be made.
He reiterated the need to regulate the amount of risks large institutions can carry, a point he highlighted at a Wall Street Journal conference on Monday.
