Fed Stonewalls House Panel On AIG Bailout Docs

ABC News’ Matthew Jaffe reports: The Federal Reserve ordered an independent watchdog not to provide a Congressional panel with documents on the government’s bailout of AIG, watchdog Neil Barofsky said Tuesday. “The Federal Reserve has directed us not to provide you with the documents that it has provided to us and that it will instead respond to your request directly,” wrote Barofsky, the Special Inspector General for the Troubled Asset Relief Program, in a letter to Darrell Issa, the ranking Republican on the House Oversight & Government Reform Committee. “We regret the Federal Reserve’s position in this matter,” Barofsky added. The House panel’s chairman Ed Towns, D-NY, then announced he would subpoena the Federal Reserve Bank of New York for the documents. The committee is looking into the Fed’s controversial decision in the fall of 2008 – with current Treasury Secretary Tim Geithner at the helm – to pay the insurance giant’s counterparties full value for their credit-default swaps. “This subpoena will provide the Committee with documents that will shed light on how and why taxpayer dollars were used for a backdoor bailout,” Towns said. Barofsky had obtained the documents from the Fed for a November 17 report on the government’s record bailout of the insurance giant. In the report the watchdog said the New York Fed “made several policy decisions that severely limited its ability to obtain concessions from the counterparties.” Ultimately 16 of AIG’s counterparties – financial institutions in the US and abroad who had deals with the insurance giant – received $62.1 billion in taxpayer money after the Fed paid them full value for the swaps, with Societe Generale receiving $16.5 billion in payments, Goldman Sachs $14 billion, Deutsche Bank $8.5 billion, and Merrill Lynch $6.2 billion. “There is no question that the effect of FRBNY’s decisions – indeed the very design of the federal assistance to AIG – was that tens of billions of dollars of government money was funneled inexorably and directly to AIG’s counterparties,” Barofsky said in the report. Following the Fed’s refusal to release the documents, Issa released a statement saying, “The American people have a right to know the full story behind the FRBNY’s decision to pay billions of dollars to AIG’s counterparties and then conceal this decision from the public…The FRBNY’s clear intent is to prevent this Committee’s oversight of the AIG counterparty payments for as long as possible.” Last week Geithner was called to testify before the House panel after new details emerged on Thursday about the New York Fed’s role in limiting AIG’s public disclosures about their payments to counterparties. The panel’s hearing will take place sometime next week, Towns has said. Both Geithner – via a Treasury spokesperson – and New York Fed general counsel Tom Baxter have stated that Geithner was not involved in the disclosure decisions. “Secretary Geithner played no role in these decisions and indeed, by November 24, he was recused from working on issues involving specific companies, including AIG,” Treasury spokeswoman Meg Reilly said last week. -Matthew Jaffe