Geithner defends terms of AIG bailout, citing risky conduct; interest rate said 'crazily high'

MarketsAssociated Press

Former top regulator Timothy Geithner defended terms of the U.S. government's bailout of American International Group Inc., saying the insurance giant's exceptionally risky behavior had caused losses that called for strict treatment.

The terms included a huge government stake in the company and an interest rate called "crazily high" by a government official.

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Geithner headed the New York Federal Reserve when it extended an $85 billion rescue loan to AIG in September 2008 as the company veered toward collapse. In trial testimony Wednesday, Geithner said he and his colleagues at the Fed and the Treasury Department believed that AIG's dire financial condition was "substantially" the result of its management taking on excessive risk.

AIG, which had operations around the globe, buckled after making huge bets on mortgage securities that soured.