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In his opening statement, Fed Chairman Ben Bernanke made the case for legislation--soon to be introduced by the administration on the hill--that would create guidelines and authority for the government to take non-bank financial institutions (like, say, Lehman Bros. and AIG) into conservatorship or receivership. Bernanke said:

The decision by the Federal Reserve on September 16, 2008, with the full support of the Treasury, to lend up to $85 billion to AIG should be viewed with this background in mind. At that time, no federal entity could provide capital to stabilize AIG and no federal or state entity outside of a bankruptcy court could wind down AIG. Unfortunately, federal bankruptcy laws do not sufficiently protect the public's strong interest in ensuring the orderly resolution of nondepository financial institutions when a failure would pose substantial systemic risks, which is why I have called on the Congress to develop new emergency resolution procedures. However, the Federal Reserve did have the authority to lend on a fully secured basis, consistent with our emergency lending authority provided by the Congress and our responsibility as central bank to maintain financial stability. We took as collateral for our loan AIG's pledge of a substantial portion of its assets, including its ownership interests in its domestic and foreign insurance subsidiaries. This decision bought time for subsequent actions by the Congress, the Treasury, the Federal Deposit Insurance Corporation, and the Federal Reserve that have avoided further failures of systemically important institutions and have supported improvements in key credit markets.

Geithner said much the same in his own opening statement. That's the line from the administration. What this means for AIG, but also existing banks and other financial institutions is still an open question. Let's see if Geithner or Bernanke or William C. Dudley (President and Chief Executive Officer of the New York Fed, also testifying) tip their hands.

Now this is reassuring. A spokesman for Michele Bachmann told the Star Tribune that the Congresswoman was speaking metaphorically when she said she wanted people to be armed and dangerous" on the issue of energy taxes.

In Bachmann's defense, it was clear from the context of the interview that she meant the public should be armed with information -- she was discussing how she would be handing out literature against cap-and-trade proposals at an upcoming town hall event.

On the other hand, she might have crossed some lines of appropriateness for an elected official when she said: "Thomas Jefferson told us, having a revolution every now and then is a good thing. And the people - we the people - are going to have to fight back hard if we're not going to lose our country."

Treasury Secretary Timothy Geithner and Fed Chairman Ben Bernanke are testifying before the House Financial Services committee as you read this. We'll be following today's hearing pretty closely, both because we (ahem) value your readership, but also because the hearing's shaping up to be much more interesting than originally anticipated.

Two big stories broke yesterday, both of which Josh wrote about over at the mother ship. Suddenly there's much more at stake than the question of when Geithner knew about the AIG bonuses. There's now also the questions of the extent to which the administration has handed over the shaping of bailout possibility to the bad financial actors themselves, and of the possibility that the administration will seek extraordinary power going forward to seize distressed non-bank financial institutions like hedge funds and investment firms. That could have huge ramifications for the government's power over regular banks, which often own such institutions, and, depending on the scope of the legislation, for much smaller institutions as well.

Stay tuned.

The new CBS poll shows how Tim Geithner's public image has held up in the face of some really bad press coverage. Overall, his numbers aren't great -- but they're not nearly as bad as you might expect:

How much confidence do you have in Treasury Secretary Tim Geithner's ability to handle the nation's financial crisis - a lot, some, not much, or none at all?

A lot 13%
Some 41%
Not much 20%
None at all 15%

So a 54% majority of respondents have some level of confidence in Geithner, but it's hardly an emphatic vote of support.

As is to expected, Democrats are the most confident, Republicans the least confident, and independents correspond closely to the top-line numbers.

In today's flurry of positive press about the stock market's 7% uptick in response to Treasury Secretary Tim Geithner's bank rescue plan, one name stands out: Bill Gross, chairman of the vast PIMCO bond fund.

Bloomberg, Time magazine, the Financial Times, and other outlets all picked up Gross' punchy declaration that the Geithner plan is "win-win-win." Reuters even touted as an "exclusive" its report that Pimco would be participating in Geithner's public-private initiative to buy up toxic mortgage-backed assets.

There's only one problem with this: Gross is practically duty-bound to love the plan, since it was partly his idea. As the WaPo reported on Sunday: (emphasis mine)

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The IRS has challenged a set of offshore tax deals set up by the now-infamous AIG Financial Products, according to court records. AIG essentially helped U.S. companies benefit from foreign tax laws for isolated tax payments through offshore banks it owned. Last year, AIG paid $61 million in disputed taxes to the government but now requests a refund, according to the lawsuit. Some of the same companies also made credit default swaps with AIG. IRS Commissioner Douglas Shulman said that the tax transaction "really perverts the foreign tax credit." (Wall Street Journal)

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Geithner, Bernanke To Face House Committee Today Treasury Secretary Tim Geithner and Federal Reserve Chairman Ben Bernanke will be appearing at a 10 a.m. ET hearing of the House Financial Services Committee. The two are expected to be grilled by members of both parties over the AIG bonuses.

Obama's Day Ahead -- And Press Conference Tonight President Obama will be making a call at 9:40 a.m. ET from the Oval Office, accompanied by middle school students from the Washington area, to congratulate the astronauts on the International Space Station and the Space Shuttle Discovery. At 11 a.m. ET, he will be meeting in the Oval Office with Australian Prime Minister Kevin Rudd, to discuss such issues as the financial crisis, climate change, Afghanistan and Pakistan, and arms control. At 8 p.m. ET, Obama will hold a news conference from the East Room.

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Nine of the top ten AIG bonus recipients have given back the payouts, according to Andrew Cuomo, the New York Attorney General who is probing the issue.

Cuomo also said, on a conference call this afternoon, that 15 of the top 20 bonus recipients from the firm's financial products unit, which is at the center of the bonus furor after causing the company's collapse last year, have returned their awards.

But he added something else that may wind up being less exculpatory for AIG: 47 percent of the $165 million in retention bonuses was awarded to Americans, he said, declaring that he expected to get that money back. That means 53 percent -- around $87 million -- of taxpayer money went to foreigners, and is unlikely to be recouped.

Cuomo said he didn't think it would be in the public interest to release the names of those who gave back the bonuses, and that his office is still assessing the risks of releasing any names at all.

Scott Murphy, the Democratic candidate in the March 31 special election for Kirsten Gillibrand's former House seat, is focusing on a clear set of messages in the home stretch: The stimulus, the stimulus, and the stimulus -- and Rush Limbaugh.

Murphy's campaign today held an event with local officials and small-business owners, promoting the benefits of the stimulus plan for the district's local infrastructure -- and of course, to excoriate Republican opponent Jim Tedisco for saying he would have voted against the plan.

And the Murphy camp just sent out an announcement for tomorrow's event in Ballston Spa, with this teaser line: "While Career Albany politician Jim Tedisco has apologized to Rush Limbaugh who openly called for our President to fail, he has refused to apologize to voters for saying 'No' to saving or creating 76,000 jobs Upstate, and 'No' to the largest middle class tax cut in history."

For more on the Rush Limbaugh stuff, check out this amusing link. There is a necessary correction to the Murphy camp's line: Tedisco wasn't quite apologizing to Rush, so much as he was denying he'd said anything bad in the first place.

We know that Wall Street is warming to Treasury Secretary Tim Geithner's new plan to encourage private sector purchases of toxic assets -- but what does Congress think?

Only a few senior lawmakers have emerged today to weigh in on Geithner's proposal, suggesting that Congress knows it can inspire market fluctuations using nothing but candid commentary on the financial crisis. But here's how the measured reaction from the Hill shook out.

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