Former Fed Chair Bernanke takes stand, underscores need for 2008 AIG bailout

Markets Associated Press

Former Federal Reserve Chairman Ben Bernanke has testified in federal court that insurance giant American Group Inc. had to be rescued by the government in 2008 to avert global catastrophe.

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Bernanke took the stand at a trial of a lawsuit brought by former AIG Chairman and CEO Maurice Greenberg, who is suing the government over its handling of AIG's bailout loan.

Bernanke was one of the key decision makers on the bailout, which began with an $85 billion rescue loan from the New York Federal Reserve in September 2008 and grew to nearly $185 billion in federal aid.

In early questioning, Bernanke kept his answers terse.

"Certainly there was an enormous amount of stress on financial institutions," he said when asked about the potential damage an AIG collapse might inflict.