Sampling Bernanke's and Geithner's Latest Grilling

The Fed chairman and the Treasury Secretary defended their work and said the dollar will continue to serve as the world's reserve currency

By BusinessWeek staff

Between the dry, measured testimony before various congressional panels and the poker-faced responses to queries from outraged lawmakers, how do Timothy Geithner and Ben Bernanke find time for their day jobs? The Treasury chief and the Federal Reserve chairman were back in the spotlight yet again on Mar. 24, this time testifying in front of the House Financial Services Committee about their handling of the AIG (AIG) bailout.

What did Wall Street economists have to say about the Geithner-Bernanke double feature and other important topics on Mar. 24? Here's a sampling, as compiled by BusinessWeek staff:

Action Economics

Bernanke, in [his] prepared testimony , said the AIG rescue was needed to avoid [a systemic financial] meltdown, while the retention bonuses were inappropriate. He was more testy in his Q&A as he tired of the repeated attacks on his character. Geithner said that new financial resolution authority was needed and agreed that the AIG bonuses were deeply troubling, even as more than one congressmen tried to pin an early date on his knowledge about the bonuses.

Geithner got a little fired up over the question of seeking a cheaper solution to AIG, saying that the Fed's action was not taken because AIG asked for help, nor to protect foreign banks, but because failure would have been "catastrophic." Bernanke also said that Lehman wasn't "allowed to fail, but failed because they could find no solution."

Geithner and Bernanke rejected proposals for a global reserve currency and a shift away from the dollar that were recently put on the table by China before the upcoming G-20 meeting. Both were also hostile to a line of questioning on the constitutional authority of the Fed and Treasury to undertake such emergency measures, with Geithner saying the authority was granted by "this body, of course," referring to Congress. Geithner also cautiously endorsed steps to apply mark-to-market accounting with the "right balance."