The New Media Journal | New York Federal Reserve Sought to Limit AIG Bank Disclosures

The New Media Journal | New York Federal Reserve Sought to Limit AIG Bank Disclosures: "The New York Federal Reserve Bank under Timothy Geithner urged insurer AIG in late 2008 to limit disclosures about its payments to banks after getting a $180 billion government bailout, emails released on Thursday showed.

The email exchanges, between the New York Fed and American International Group Inc lawyers, showed that AIG initially proposed disclosing to the U.S. Securities and Exchange Commission in early December 2008 that it would pay counterparties 100 cents on the dollar to liquidate credit default swaps it sold them.

But the decision to pay Goldman Sachs (GS.N), Societe Generale (SOGN.PA) and other global banking giants in full with taxpayer funds was not disclosed by AIG until March 2009, when it announced a $93 billion payoff that stoked public rage over the bailout.

Adding fuel to the fire, Geithner, who by then had become the U.S. Treasury secretary, was forced to allow AIG to pay $165 million in bonuses to top executives of the division that nearly caused its collapse.

Representative Darrell Issa, a California Republican who requested the emails from AIG and made them public, said they show that the New York Fed tried to suppress politically sensitive information about the bailout.

'It appears that the New York Fed deliberately pressured AIG to restrict and delay the disclosure of important information to the SEC,' he said in a statement. 'The American taxpayers, who own approximately 80 percent of AIG, deserve full and complete disclosure under our nation's securities laws, not the withholding of politically inconvenient information.'

The emails showed that an explicit reference to counterparties receiving 100 percent of par value and other information on the transaction was crossed-out from a proposed SEC filing that was 'marked up' by attorneys working for the New York Fed.

When the regulatory filing, disclosing a deal for the New York Fed's Maiden Lane III fund to take on an additional $16 billion of AIG obligations, was finally made on December 24, 2008, it made no reference to the counterparty payment percentage. But it did note that about $15.9 billion in payments and surrendered collateral would satisfy a $16 billion 'par amount' of obligations.

Banks ultimately received $27.1 billion in payments from Maiden Lane III to liquidate the credit default swaps -- part of the overall $93 billion AIG payout that critics have labeled a stealth bailout of the institutions.

The New York Fed during Geithner's final weeks at the bank also has been chided for not negotiating hard enough for concessions from the banks after a bailout he helped engineer along with Fed Chairman Ben Bernanke and former Treasury Secretary Henry Paulson. All but one bank refused to offer any discount on their holdings.

Geithner, who has faced criticism for his handling of the AIG bailout throughout his first year in office, was nominated for Treasury secretary on November 24, 2008, by then president-elect Barack Obama, the day much of the email traffic started."