Fed Chairman Ben Bernanke said Tuesday his agency would cooperate fully with any Government Accountability Office [GAO] probe into “all aspects” of its aid to American International Group (AIG).
According to MarektWatch, in a letter to the GAO, Bernanke defended the Fed”s role in the rescue of AIG ; which has prompted so much outrage, saying the failure of the insurer would have had major implications on the already weak global economy.
Bernanke’s statement comes as the probe into the New York Fed’s role in rescuing AIG is heating. The Fed’s use of its powers to assist AIG has not sat well with lawmakers from both parties. On January 7, Congressman Darrell Issa, the ranking Republican on the House of Rep. Committee on Oversight and Gov’t Reform, released emails he had obtained from AIG showing that between November of 2008 and March of last year, the Fed of New York advised the embattled insurer to hide information on counter-party payments from federal regulators.
The most important aspect of these emails is the government’s decision to fully reimburse AIG’s bank counterparties for $62.1 billion in derivatives. That’s 100 cents on the dollar for billions of dollars in CDSs they had purchased from AIG, which the insolvent insurer could not redeem. The House Oversight Committee is demanding that the Fed of New York turn over its records about the bailout of the American International Group.
Treasury Secretary Timothy Geithner, who was running the New York Fed when AIG was saved in 2008, has been called to testify before a House panel reviewing the issue next week.