Fed takes heat on AIG from both sides of Congress

In what may be a foreshadowing of the sort of questions Fed Chairman Ben Bernanke can expect when he testifies before congressional committees next week, Republicans and Democrats alike expressed concern over the size of the bailout and perceptions that it put Wall Street ahead of Main Street.

House Speaker Nancy Pelosi, a California Democrat, told reporters at a news conference that lawmakers had a number of questions, particularly after they were told by Fed officials that the AIG bailout was urgent in part because of foreign central banks' worries about fallout to their own economies.

"It raises certain questions. Why aren't these foreign institutions participating in this bailout? Where is this money coming from? What is its impact on our budget?" Pelosi said.

Leveling harsh criticism against the Bush administration's oversight of the financial industry over the past eight years, Pelosi also said hearings will look at potential industry fraud and mismanagement.

House Financial Services Committee Chairman Barney Frank, a Massachusetts Democrat, questioned whether Federal Reserve Chairman Ben Bernanke should have so much power to act unilaterally.

"No one in a democracy, unelected, should have $800 billion to dispense with as he sees fit," Frank said, referring to a pool of money the Fed has had at its disposal to deal with financial crises.

"Once again the Fed has put the taxpayers on the hook for billions of dollars to bail out an institution that put greed ahead of responsibility and used their good name to take risky bets that did not pay off," he said. "The only difference between what the Fed did and what Hugo Chavez is doing in Venezuela is Chavez doesn't put taxpayer dollars at risk when he takes over companies - he just takes them."