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Geithner’s New York Fed Told AIG to Limit Swaps Disclosure
Hugh Son
Bloomberg
Thursday, January 7th, 2010
The Federal Reserve Bank of New York, then led
by Timothy Geithner, told American International Group Inc.
to withhold details from the public about the bailed-out insurer’s
payments to banks during the depths of the financial crisis,
e-mails between the company and its regulator show.
AIG said in a draft of a regulatory filing that the insurer
paid banks, which included Goldman Sachs Group Inc. and Societe
Generale SA, 100 cents on the dollar for credit-default swaps
they bought from the firm. The New York Fed crossed out the
reference, according to the e-mails, and AIG excluded the language
when the filing was made public on Dec. 24, 2008. The e-mails
were obtained by Representative Darrell Issa, ranking member
of the House Oversight and Government Reform Committee.
The New York Fed took over negotiations between AIG and the
banks in November 2008 as losses on the swaps, which were contracts
tied to subprime home loans, threatened to swamp the insurer
weeks after its taxpayer-funded rescue. The regulator decided
that Goldman Sachs and more than a dozen banks would be fully
repaid for $62.1 billion of the swaps, prompting lawmakers to
call the AIG rescue a “backdoor bailout” of financial
firms.
“It appears that the New York Fed deliberately pressured
AIG to restrict and delay the disclosure of important information,”
said Issa, a California Republican. Taxpayers “deserve
full and complete disclosure under our nation’s securities
laws, not the withholding of politically inconvenient information.”
President Barack Obama selected Geithner as Treasury secretary,
a post he took last year.
Full
article here
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