Competitors urge scrutiny of AIG bailout

WASHINGTON, March 1 (UPI) -- An insurance trade group says U.S. government bailouts for American International Group Inc. must not be used by the firm for competitive advantages.

The American Insurance Association, in a letter sent to Federal Reserve Chairman Ben Bernanke and U.S. Treasury Secretary Timothy Geithner, urged them to make sure AIG "does not use federal dollars to weaken market competition or for other improper purposes," the publication Business Insurance reported Sunday.

"The potential for private market distortion grows where government provides subsidized capital in exchange for an ownership stake in private companies," AIA President Leigh Ann Pusey wrote last week. "In recent months, we have heard reports from companies that compete in the market with AIG that those distortions are occurring.

"It appears that such significant government financial support of AIG has facilitated market behavior that is detrimental to other property/casualty insurers and to the taxpayers."

AIG this week will receive additional taxpayer funds of up to $30 billion as part of a revamped government bailout, The Wall Street Journal reported Sunday. The insurer reportedly has agreed to repay a large portion of $40 billion it owes the Federal Reserve with equity stakes in two AIG overseas units.