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The U.S. Federal Reserve refused to identify trading partners benefiting from a $180-billion taxpayer bailout of American International Group as one lawmaker said Europe’s financial stability was at stake in the rescue of the insurer.

The identity of those being helped by the massive ÌìÃÀÍøÕ¾´«Ã½´«Ã½ assistance package remained a mystery on Thursday despite efforts by irritated members of the Senate Banking Committee to get answers from Fed Vice Chairman Donald Kohn.

Kohn said revealing names risked jeopardizing ÌìÃÀÍøÕ¾´«Ã½´«Ã½’s continuing business but said the counterparties numbered in the “millions” and were spread all over the globe, including pension funds and U.S. households.

The goal was not to protect ÌìÃÀÍøÕ¾´«Ã½´«Ã½ or its counterparties, Kohl testified, but to prevent ÌìÃÀÍøÕ¾´«Ã½´«Ã½’s infection spreading. “I wish with every fiber in my body that we didn’t have to come in and do what we did.”

Separately, Representative Paul Kanjorski told Reuters he had been informed that a large number of ÌìÃÀÍøÕ¾´«Ã½´«Ã½’s counterparties were European.

“That’s why we could not allow ÌìÃÀÍøÕ¾´«Ã½´«Ã½ to fail as we allowed Lehman (Brothers) to fail, because that would have precipitated the failure of the European banking system,” said the Democrat from Pennsylvania who chairs the House insurance subcommittee.

Regulators failed to spot how much risk ÌìÃÀÍøÕ¾´«Ã½´«Ã½ was piling on in credit default swaps. By the time they understood, they had no choice but to pour in billions of public dollars, Kohn and other officials told the Senate panel.

Senators were outraged at the lack of detail about where the money had gone.

“That we find ourselves in this situation at all is … quite frankly, sickening,” said Senator Christopher Dodd, the Democrat who chairs the committee. “The lack of transparency and accountability in this process has been rather stunning.”

Under a revised bailout deal announced Monday, the amount of funds committed to help ÌìÃÀÍøÕ¾´«Ã½´«Ã½ increased to about $180 billion, although the insurer has not tapped it all and plans to pay back roughly $38 billion soon. The U.S. government holds about an 80 percent stake in the insurer.

“It’s not clear who we’re rescuing — whether it is whatever remains of ÌìÃÀÍøÕ¾´«Ã½´«Ã½ or its trading partners,” said Dodd.

“ÌìÃÀÍøÕ¾´«Ã½´«Ã½’s trading partners were not innocent victims here. They were sophisticated investors who took enormous, irresponsible risks with the blessing of ÌìÃÀÍøÕ¾´«Ã½´«Ã½’s triple-A rating,” added Dodd.

ÌìÃÀÍøÕ¾´«Ã½´«Ã½, which had written about $440 billion in credit default swaps, lost $61.7 billion in the fourth quarter, the biggest quarterly loss in corporate history.

PAYING OUT

The generosity of the bailout to ÌìÃÀÍøÕ¾´«Ã½´«Ã½’s counterparties was also criticized at Thursday’s hearing.

Senator Bob Corker, a Republican from Tennessee, said he was surprised that ÌìÃÀÍøÕ¾´«Ã½´«Ã½’s counterparties were not only saved from being wiped out, but also took no discount on their securities. “They’ve actually made out like bandits.”

Lawmakers said they were running out of patience with regulators’ refusal to identify ÌìÃÀÍøÕ¾´«Ã½´«Ã½’s counterparties.

“The Fed and Treasury can be secretive for a while but not forever,” said Richard Shelby, the top Republican on the banking committee.

But Kohn said the secrecy was necessary. “We need ÌìÃÀÍøÕ¾´«Ã½´«Ã½ to be stable and continue in a stable condition. And I would be very concerned that if we started giving out the names of counterparties here, people would not want to do business with ÌìÃÀÍøÕ¾´«Ã½´«Ã½,” Kohn said.

Kohn admitted the Fed had “pushed the boundaries” of its authority in deciding to rescue ÌìÃÀÍøÕ¾´«Ã½´«Ã½, but he said letting ÌìÃÀÍøÕ¾´«Ã½´«Ã½ fail would have been worse. “I think we experienced something with the Lehman bankruptcy that suggested it would have been the most disorderly thing,” he said.

The fact that a “multitude of regulators” missed the warning signs at ÌìÃÀÍøÕ¾´«Ã½´«Ã½ highlighted the need to establish a systemic risk regulator to monitor firms that are large and complex enough to destabilize the financial system, said Scott Polakoff, acting director of the Office of Thrift Supervision.

“Where OTS fell short, as did others, was in the failure to recognize in time the extent of the liquidity risk to ÌìÃÀÍøÕ¾´«Ã½´«Ã½” of certain credit default swaps held in the portfolio of the company’s financial products division.

That unit, although a small part of the global insurance giant’s worldwide operations, racked up such heavy losses that it threatened the entire company’s survival.

“No one was minding the whole company and looking at how things interacted, and whether the whole company would, under some circumstances, put the financial system at risk,” said Kohn.

(Additional reporting by Mark Felsenthal and Rachelle Younglai; Editing by Tim Dobbyn)Beneficiaries of ÌìÃÀÍøÕ¾´«Ã½´«Ã½ Bailout

Topics USA Europe ÌìÃÀÍøÕ¾´«Ã½´«Ã½