An AIG failure, he warns, would have led to "a further sharp decline in confidence in the global banking system and possibly to the collapse of other major financial institutions."
"At best, the consequences of AIG's failure would have been a significant intensification of an already severe financial crisis and a further worsening of economic conditions," he emphasizes. "Conceivably, its failure could have triggered a 1930s-style global financial and economic meltdown, with catastrophic implications for production, incomes, and jobs."
Accordingly, the Federal Reserve and the Treasury Department agreed that these risks were "unacceptable" and bailed out AIG to the tune of over $180 billion.
To prevent future occurrences of such a predicament, Bernanke today reiterates his calls for regulatory reform, namely strong government oversight and a new set of federal regulatory procedures.
The Fed chief will deliver his remarks at 1:30 p.m. ET in Georgia, followed by a question-and-answer session.
ABC News' Charlie Herman contributed to this report.