Tags: tim | geithner | new york | fed | aig | e-mails

Report: Geithner's N.Y. Fed Told AIG to Keep Quiet

Thursday, 07 Jan 2010 11:34 AM

In November 2008, the Federal Reserve Bank of New York — then led by now Treasury secretary Timothy Geithner — ordered bailed-out insurer American International Group to limit disclosure on payments made to banks at the height of the financial crisis, The New York Times reports.

E-mail messages obtained by Rep. Darrell Issa (R-Calif.) reveal that the bailed-out insurance giant and its regulator reversed roles, with AIG staff urging disclosure of certain details on payments for credit-default swaps to major banks and the New York Fed discouraging such revelations.

The deals were part of a massive rescue effort at the peak of the financial crisis.

For example, in a draft of one regulatory filing, AIG said it had paid banks — including Goldman Sachs and Societe Generale — full value for the collateralized debt obligations the insurer had bought.

The response to that draft from the law firm Davis Polk and Wardwell, which represented the New York Fed, deleted that information, which did not appear in the final version filed on Dec. 24, 2008.

“It appears that the New York Fed deliberately pressured AIG to restrict and delay the disclosure of important information to the SEC,” Issa observed in an e-mailed statement.

Issa is the ranking member of the House Oversight and Government Reform Committee.

AIG, the re-insurer for five California workers’ compensation, owes more than $527 million in reinsurance to liquidated workers’ compensation insurers following a U.S. Court of Appeals ruling that upheld a lower court award.

“Upholding this award means that hundreds of millions of dollars will be available to pay the claims of workers injured on the job through the California Guarantee Association and other guarantee associations,” California insurance commissioner Steve Poizner told Bloomberg.

Lawmakers and others have accused Geithner's Fed of overpaying banks, including Goldman and Deutsche Bank, to cancel deals with AIG.

The New York Fed says forcing the banks to take losses or disclosing more information could have worsened the crisis, the Associated Press reported.

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In November 2008, the Federal Reserve Bank of New York then led by now Treasury secretary Timothy Geithner ordered bailed-out insurer American International Group to limit disclosure on payments made to banks at the height of the financial crisis, The New York Times...
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