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Journalism of Courage
A US bailout watchdog has launched two new investigations into the New York Federal Reserve Banks actions on insurer AIGs disclosure of payments to banks after its 2008 rescue,excerpts of prepared congressional testimony showed on Monday.
Neil Barofsky,the special inspector general of the Treasurys 700 billion Troubled Asset Relief Program,said he would launch a probe into whether there was any misconduct relating to public disclosure of the 62.1 billion paid to retire credit default swaps with banks.
Also appearing at the hearing will be US Treasury Secretary Timothy Geithner,who ran the New York Fed at the time of the American International Group bailout in 2008,and Thomas Baxter,the New York Fed8217;s general counsel.
Barofsky said he would also launch a second probe into the New York Fed8217;s level of cooperation with a prior audit conducted by his office into the AIG payments to US and foreign-owned banks.
The probes follow the disclosure of email exchanges between Fed and AIG lawyers which some US lawmakers say show pressure by the New York Fed under Geithner8217;s tenure to suppress information about the payments.
The payments for securities from a Fed rescue vehicle called Maiden Lane III have been labeled a 8220;back-door bailout8221; for Goldman Sachs,Societe Generale,Deutsche Bank and other big global banks. 8220;As has been widely reported,these newly disclosed documents,among other things,relate to discussions about the public disclosure by AIG of the Maiden Lane III transactions in filings with the Securities and Exchange Commission,8221; Barofsky said in the testimony.
8220;In light of these documents,we have initiated an investigation in to whether there was any misconduct relating to the disclosure or lack thereof concerning the Maiden Lane III transactions,8221; he wrote.
The New York Fed has argued that it did not attempt to mislead the public about the AIG payments. But the bank did support AIG8217;s request to the SEC to keep secret some details about the individual transactions to acquire underlying assets to retire the derivatives and preserve their value for US taxpayers.
The new probes are likely to keep attention focused on the AIG payments controversy,which has dogged Geithner for nearly his whole first year in charge of the Treasury. The New York Fed and the Treasury say he was never involved in decisions about AIG disclosures,and was recused from dealings with specific companies on November 24,2008,when he was nominated for the Treasury job.
8220;If anyone at the Fed thought that this investigation will stop after Wednesday8217;s hearing,they are completely mistaken,8221; said US Rep. Darrell Issa,the top Republican on the House Oversight and Government Reform Committee.8221;
8220;There has been a widespread effort by officials at the NY Fed to thwart transparency and we will continue to pursue this investigation for as long as it takes to get the truth,8221; Issa added.
