Lawmaker: AIG failure would "bring down Europe"

By Rachelle Younglai

WASHINGTON (Reuters) - The U.S. government rescued giant insurer American International Group (AIG.N) in part because its collapse would dramatically hurt European banks, a senior Democratic lawmaker said on Thursday.

The U.S. government has bailed out AIG three times since September 16 and committed about $180 billion to keep the insurer alive and doing business.

"One of the reasons we had to rescue AIG was the fact that it was going to bring down Europe," Pennsylvania Rep. Paul Kanjorski told reporters after his subcommittee held a hearing on systemic risk.

Later, in an interview with Reuters, Kanjorski said he was told that a large number of AIG's counterparties were European.

"That's why we could not allow AIG to fail as we allowed Lehman (Brothers) to fail, because that would have precipitated the failure of the European banking system," he said.

Some lawmakers are pushing the Federal Reserve and Treasury Department to reveal AIG's counterparties and have expressed frustration over the secretive nature of the government bailouts.

At a Senate Banking Committee hearing earlier in the day, chairman Christopher Dodd, a Democrat, criticized what he called a "stunning" lack of transparency and accountability about exactly where the billions in rescue money have gone.

(Reporting by Rachelle Younglai, editing by Leslie Gevirtz and Matthew Lewis)