Bernanke: Mad as Hell About AIG, But Supports Bailouts to Avert 'Disaster'

"This is the most animated I've ever seen Ben Bernake," said Dr. David Krause, Director of Marquette University's AIM Program. "He was clearly upset about having to bailout AIG again."

A day after the U.S. government unveiled the fourth AIG bailout, the insurance giant's failure was a major topic of conversation during Q&A after Ben Bernanke's testimony before the Senate Budget Committee. "I share your concern, I share your anger," the Fed Chairman said in response to a question from Sen. Wyden (D-Oregon) about AIG.

Bernanke was particularly peeved that AIG "exploited a huge gap in regulatory oversight" to essentially operate a hedge fund on top of its core insurance business. As a result, he said an AIG failure would be a "disaster," affecting both the insurance industry and Wall Street firms that are counterparties on derivatives trades with AIG.

"It's a terrible situation, but we're not doing this to bail out AIG or their shareholders," Bernanke declared. "We're doing this to protect our financial system and to avoid a much more severe crisis in our global economy."