AIG, GE Capital face tougher oversight

The US Treasury on Tuesday designated insurer American International Group and lender General Electric Capital as "systemically important" institutions, requiring tougher oversight because they are large enough to damage the entire financial system if they founder. The two -- both propped up against collapse in the 2008 crisis by the government -- are the first non-banks to be labeled "too-big-to-fail." It means they will have to meet higher capital standards and undergo stress tests to see how they hold up in the conditions that battered the economy in the crisis. The Treasury's Financial Stability Oversight Council said it had determined "that material financial distress at these companies - if it were to occur - could pose a threat to US financial stability." The two join eight banks previously designated as systemically important and forced to meet tougher standards. "Today, the Council has taken a decisive step to address threats to US financial stability and create a safer and more resilient financial system," said Treasury Secretary Jacob Lew in a statement. "These designations will help protect the financial system and broader economy from the types of risks that contributed to the financial crisis." AIG nearly collapsed in the crisis and the government was forced to take it over in a rescue backed by $180 billion in public funds, to prevent it from pulling down with it a number of other exposed banks and non-banks. GE Capital meanwhile garnered tens of billions of dollars in liquidity support and guarantees from the government in the crisis.