25% Unemployment Without AIG Bailout

Former Treasury Secretary Henry Paulson said on Capitol Hill today that without a bailout of troubled insurer American International Group, Inc (NYSE: AIG), the unemployment rate would have reached 25%.

Paulson testified before the House Committee on Oversight and Government Reform and was grilled by lawmakers who argued that government officials did not have the taxpayers' interests in mind during the bailout. The hearing related to payments to AIG's credit default swap counterparties.

Paulson said if AIG had failed the financial system would have collapsed. He added, "if the system had collapsed million more in savings would have been lost. Industrial companies of all size would not have been able to raise funding and they would not have been able to pay employees, this would have rippled through the economy."