Bernanke defends AIG bailout

US Federal Reserve Chairman Ben Bernanke (above) defended the government's latest bailout of embattled insurer AIG, telling irate lawmakers that he was also angry, but that the failure to act could have triggered an economic disaster.

Bernanke, in testimony to the Senate Budget Committee, gave a grim view of US economic prospects, saying labor market conditions may have worsened in recent weeks. His comments helped drive the stock market briefly lower.

Pressed by the Senate committee to justify the latest in an expanding series of bailouts for American International Group, Bernanke said there was no alternative, even though the company had been irresponsible.