By Hugh Son and Andrew Frye
Jan. 13 (Bloomberg) — The Federal Reserve Bank of New York was ordered by a House committee to provide Timothy Geithner’s e-mails, phone logs and meeting notes tied to the bailout of American International Group Inc.
The subpoena from House Oversight and Government Reform Committee Chairman Edolphus Towns demands by Jan. 19 all documents related to the New York Fed decision to fully reimburse banks that bought protection from AIG and efforts to persuade AIG to keep information about the payments from the public, Towns said in a statement today.
“We need to understand why and how taxpayer dollars were used to bail out the same people who helped cause the financial crisis in the first place,” Towns said in a statement. Geithner, who was president of the New York Fed when AIG was rescued, is now President Barack Obama’s Treasury secretary.
The New York Fed had resisted since November calls to provide documents without a subpoena, Darrell Issa, the ranking Republican on the oversight committee, said yesterday in a letter. The New York Fed asked AIG in 2008 and 2009 to remove information about the bank payments from regulatory filings, according to e-mails released by Issa last week.
The subpoena also called for documents from New York Fed General Counsel Thomas Baxter, Stephen Friedman, a former New York Fed director and current Goldman Sachs Group Inc. director, and Sarah Dahlgren, a New York Fed senior vice president who manages its AIG oversight team. Towns also demanded term sheets related to payments to AIG’s credit-default swap counterparties.
Deborah Kilroe, a spokeswoman for the New York Fed, declined to comment. She said yesterday that the New York Fed will “work with the committee to provide relevant information as appropriate.”
Geithner made the decision to pay banks 100 cents on the dollar for their AIG swaps tied to subprime mortgages even though the underlying assets had declined in value, according to a November report by the government watchdog overseeing the bailout program. Banks including Goldman Sachs Group Inc. and Societe Generale SA were among beneficiaries of AIG’s rescue, called by lawmakers a “backdoor bailout” for financial firms.
The insurer’s rescue “provided AIG’s counterparties with tens of billions of dollars they likely would have not otherwise received,” wrote Neil Barofsky, the special inspector of the U.S. Troubled Asset Relief Program.
Reference Crossed Out
AIG planned to disclose in December 2008 that it fully reimbursed the banks to retire the swaps contracts. The New York Fed crossed out the reference to the full payments in a draft of a regulatory filing, according to the e-mails released by Issa, and AIG excluded the language when the filing was made public Dec. 24, 2008.
Geithner was also asked by the oversight committee last week to testify in public hearings about what he knew of the New York Fed’s efforts to limit the disclosure. Baxter said last week that Geithner wasn’t aware of the issue because the lawyer didn’t think it merited Geithner’s attention.
Andrew Williams, a spokesman for the Treasury, declined to comment on the demand for Geithner’s e-mail from his time at the New York Fed.
Last Updated: January 13, 2010 18:11 EST