White House says concerned about more companies

WASHINGTON (Reuters) - The White House on Wednesday defended government actions to shore up troubled insurance company American International Group Inc, saying it was to prevent broader harm and that there was concern about other companies.

The U.S. Treasury and Federal Reserve determined that an emergency $85 billion rescue of AIG was required to prevent the impact spreading through the economy, White House spokeswoman Dana Perino said.

Concerns remained about the financial health of other companies and any future actions would be determined on a case-by-case basis, she said without naming any firms.

"We remain concerned about other companies and that's why the secretary of the Treasury continues to work with the team to see if we can stem any other losses," Perino said.

The decision to support AIG was the right action to take for a U.S. economy which was showing "a very mixed picture," she said. "Our economy has the strength to be able to deal with these shocks."

Treasury and Federal Reserve chiefs and other government economic advisors had determined that "some of these companies were so big that to allow them to fail would have caused even greater harm and damage to the economy," Perino said.

"The taxpayers will be paid back first," she said. Taxpayers would be worse off if the economy took a bigger hit from company failures so "we think that the actions that have been taken were appropriate ones," Perino said.

She described the current economic environment as "challenging times" and said it would take time to work through the crisis.

Policy-makers believe markets are undergoing a stressful process that will result in a major restructuring of the financial system. They see it as their job to try to mitigate any collateral damage to the economy.

Some lawmakers and seasoned financial experts have said it might be a good idea to set up a government agency to take on and over time dispose of bad mortgage-related assets.

Asked about the proposals, Perino said: "I wouldn't rule it out, but I'm not saying that it's necessarily on the list of issues that we're trying to deal with right now."

Administration sources indicated that with Congress aiming to adjourn at the end of next week, it was unlikely any such agency could be established quickly enough to play a significant role in easing credit-market pressures. Instead, they are concentrating on steps that can be swiftly employed.

(Reporting by Tabassum Zakaria and Glenn Somerville)

http://www.reuters.com/article/rbssFina ... 5420080917