NY Federal Reserve Bank wanted AIG bank payments secret
Published emails show the Federal Reserve Bank of New York, then led by US Treasury boss Tim Geithner, wanted AIG to keep payments to counterparties, including UK banks, secret Bloomberg reports.
The regulator decided that Goldman Sachs and more than a dozen banks would be fully repaid for $62.1bn of the swaps, prompting lawmakers to call the AIG rescue a “backdoor bailout” of financial firms.
The FT says it is not clear whether the New York Fed acted out of concern for the market or for its own political position.
Oversight Committee
Darrell Issa, the senior Republican on the House oversight committee, requested information from the New York Fed and AIG about the circumstances behind $27.1bn in payments to banks, ranging from Goldman Sachs to Société Générale, made to cancel derivatives contracts.
Issa got the emails showing the New York Fed pushing AIG to delay releasing information and cut the detail provided to the Securities and Exchange Commission. Pressure from the SEC and Congress prompted AIG to file more details later.
“The American txpayers, who own approximately 80% of AIG, deserve full and complete disclosure under our nation’s securities laws, not the withholding of politically inconvenient information,” Issa said. “This news ought to serve as a cautionary tale to those who advocate giving the Federal Reserve even more power over the US economy.”
AIG resisted secrecy attempt
The New York Fed used a special purchase vehicle, Maiden Lane III, to buy collateralised debt obligations from 16 institutions, which were AIG’s credit default swap counterparties. It made no secret of its desire to keep details private.
In at least one instance, AIG pushed for documents to be disclosed and then released the information.
