A congressional panel Wednesday subpoenaed documents on the US bailout of insurance giant AIG in 2008, including from Timothy Geithner, the former New York Fed chief and current Treasury secretary.
Representative Edolphus Towns said his House Oversight and Government Reform Committee was seeking information on payments made to AIG counterparties — major global banks including Goldman Sachs, Morgan Stanley, Barclays, Bank of America, Deutsche Bank, and Societe Generale.
The panel seeks emails, phone logs and meeting notes from the New York Federal Reserve and Geithner, among others, on the discussions held ahead of the bailout decision.
“Questions remain surrounding AIG’s credit default swap counterparties and why these companies received full compensation, when the best they could have hoped for in a bankruptcy proceeding was perhaps 30 or 40 cents on the dollar,” the panel said in a statement.
The subpoena “specifically requests all documents surrounding the decision to pay AIG’s counterparties 100 cents on the dollar.”
The statement said the subpoena also “demands all documents pertaining to the decision to not disclose to the public information about the counterparty payments.”
The Federal Reserve Bank of New York said it would provide any relevant material to the congressional panel.
“We will work with the committee to provide relevant information as appropriate,” said Deborah Kilroe, the bank’s spokeswoman.
The congressional panel noted that internal AIG emails obtained by the committee to date “indicate that the (New York Fed) may have urged AIG to keep secret the details of the counterparty payments, despite the fact that taxpayer dollars made the payments possible.”
Asked to react to the announcement, the Treasury said it had no comment on the subpoena.
The announcement came after news reports said that Geithner, while president at the New York Fed, sought to limit disclosure of AIG’s payments to counterparties that had purchased credit default swaps, or a form of insurance for troubled mortgage securities.
Fed officials later said they had no legal authority to impose a “haircut”
or reduction on these payments because AIG was not in bankruptcy.
The Fed provided a loan of 85 billion dollars to AIG in September 2008 in what would be the first portion of a bailout worth some 180 billion dollars.
Because AIG used the funds to reimburse banks holding the distressed mortgage securities, some have called the move a “backdoor bailout” of those firms including Goldman Sachs and a number of foreign banks.
The details of the counterparty payments were initially kept secret but the recipients were disclosed in March 2009.
The 22.4 billion dollars payments were made to a number of firms. France’s Societe Generale, Germany’s Deutsche Bank and New York-based investment bank Goldman Sachs were the top three recipients.
