Two prominent U.S. lawmakers said Friday they will investigate revelations that Treasury Secretary Tim Geithner improperly influenced insurance conglomerate American International Group (AIG) to withhold information on payments it made to banks after a government bailout.
Rep. Spencer Bachus, the top Republican on the House Financial Services Committee, and Elijah Cummings, a Democrat on the House Oversight and Gov’t Reform Committee, requested their respective panels to look into what information was withheld from the public at the New York Fed’s request in 2008 — led at the time by Geithner — and also into e-mails showing that the New York Fed suppressed details about deals that allowed big banks to collect billions from AIG.
Bloomberg: “It is essential to know what knowledge or involvement now-Secretary of the Treasury Geithner had in the decisions made by New York Fed officials to exclude information” from AIG’s regulatory filings, Cummings wrote yesterday to committee Chairman Edolphus Towns, a New York Democrat. It is “critical” that Geithner testify before Congress, Cummings wrote.
According to AP, e-mails between lawyers for the New York Fed and AIG show AIG’s willingness to disclose some details about billions in payments it made to cancel financial deals with banks, including Goldman Sachs (GS) and Deutsche Bank (DB).
But lawyers for the New York Fed, which engineered AIG’s bailout in collaboration with the Bush administration’s Treasury Dept., told the embattled insurer to remove the information from a draft.
The e-mail exchanges, notes AP, occurred at the height of the financial crisis in the fall of 2008. Representative Darrell Issa, a California Republican on the oversight committee, has called payments to AIG trading partners a “backdoor bailout” because banks got 100 cents on the dollar for swaps tied to subprime mortgages.
The Democratic chairman of one committee said he was considering calling Geithner to testify on the Hill. If he is called, it will be another tough grilling for him.