July 2 (Bloomberg) -- General Electric Co.’s finance unit and American International Group Inc. opted against fighting a decision by regulators that they pose potential risks to the economy, clearing the way for stricter oversight.
“We have decided not to appeal or ask for a hearing,” Russell Wilkerson, a spokesman for the finance unit of Fairfield, Connecticut-based GE, said today in a statement.
The Treasury Department’s Financial Stability Oversight Council on June 3 recommended designating GE Capital, AIG and Prudential Financial Inc. as systemically important financial institutions, or SIFIs. A 30-day window to appeal the decision expires tomorrow. Prudential has said it was weighing a challenge, and a spokesman for the Newark, New Jersey-based insurer declined to comment today.
AIG repaid a U.S. bailout last year and has said it understands why the company faces extra scrutiny. The Dodd-Frank act increased supervision of the largest U.S. lenders and allows the council to designate non-bank firms for extra oversight.
“AIG welcomes supervision by the Federal Reserve, and is already working closely with the Federal Reserve Bank of New York as our regulator,” Jon Diat, a spokesman for the insurer, said in an e-mail.
GE Chief Executive Officer Jeffrey Immelt has been shrinking the finance division since access to credit evaporated after the 2008 bankruptcy of Lehman Brothers Holdings Inc., jeopardizing the entire company. He has pared investments in real estate and foreign financial institutions. The company has said since at least 2010 it could face SIFI status.
“We have strong capital and liquidity positions and we are already supervised by the Fed,” Wilkerson wrote. “We have been and will be prepared to meet the requirements for SIFIs.”