AIG CEO supports Fed on SIFI

"The Fed is going to put in a banking discipline, and that is they want things to be done exactly what your policies are, what your procedures are, how do you demonstrate you're following your procedures," Benmosche said.

"So, they're going to bring us to a whole new level of discipline around policies, procedures and auditing what we do and accomplish," he explained.

Benmosche said that the difference between banks and insurers is that "Banks are very particular about reconciling and balancing all the time, especially before they do things; insurance companies have a tendency to do things and reconcile after the fact."

So, Benmosche said, "it's a question of when you do your analysis, because insurance companies are traditionally used to more time."

In other words, he explained, "The Fed is looking for banking discipline and the insurance industry is what they're going to start moving towards," although he did not say how the Fed would go about putting its discipline into effect at other insurers. It has taken federal agencies more than two years since the Dodd-Frank financial services reform law was enacted to get to the point of designating two insurers.

In his comments, Benmosche made three other major points.

First, he said the economy is not growing at an ideal pace because "we're going through a huge psychological change" because people don't have the confidence in the economy they should have, a confidence driven by the fact that rules are in place to prevent the kind of things that got AIG, and other companies, into big trouble four years ago.

He said that, "People are nervous about investing for the long haul, because the investors don't want to wait for the long haul.

"You have regulators who are changing the ground rules who haven't established ground rules yet, so that's a concern for people," he said.

"So, there's a fear of getting caught — whatever caught means in terms of investors, the markets or the regulators. So, people are ultra-cautious; that's what's going to hurt the economy," he said.  

To get the economy moving again, Benmosche said that regulators and the people who are being regulated are going to have to "come to terms with the fact that, like it or not, we have dramatically improved the financial system in the last four years, and yet nobody — and you've heard me say this before — nobody wants to talk about how much confidence we should all have in companies like AIG."

He explained, that "four years ago, if we did the testing that the Federal Reserve does now four years ago, AIG would've failed across the board.

"And so, therefore, we don't fail today, we're in great shape, because we're running the test," Benmosche said. "We're being overseen in a very different way, and I wish we could talk more optimistically about a country that's doing better than our dialogue is today."

Another factor is that there is "still … a confidence issue." He said corporate managers, CEOs, heads of businesses are sitting on cash, uncertain as far as what happens next.

"Why do you think that is, given the level of interest rates, given the fact that you're looking at a corporate story, $4 trillion, $3.6 trillion estimated of cash on balance sheets, and yet we're not seeing the kind of euphoria one would expect or vibrancy in business one would expect at this part of the cycle," Benmosche said.