Federal Reserve No Longer To Keep Its Secrets about AIG Bailout

The Federal Reserve is giving up on the fight to keep some of its bank bailout dealings secret. Federal Reserve Chairman Ben Bernanke (pictured) sent a letter to the General Accountability Office inviting the congressional auditors to conduct a "full review" of the Fed's aid to struggling insurance giant AIG (AIG), according to a report from Bloomberg.
"The Federal Reserve would welcome a full review by GAO of all aspects of our involvement in the extension of credit to AIG," Bernanke said Tuesday in a letter to Gene Dodaro, acting head of the Government Accountability Office. A copy of the letter was released by the Fed.

Geithner: Not Aware Of Secrets Pact

U.S. Rep. Darrel Issa (R-Calif.) released emails he obtained from the New York Federal Reserve that showed officials at the Fed asked AIG not to disclose key details of their agreements to make big payouts to banks in late 2008. Treasury Secretary Timothy Geithner, who was president of the New York Fed at the time the events took place, contends he was not aware that AIG had been asked to keep that information secret, and says he was not privy to the emails in question. The emails, he points out, were sent after he had recused himself from the workings of the Fed because he was named to be treasury secretary.

House Committee on Oversight and Government Reform last week subpoenaed all documents related to the New York Fed's decision to fully reimburse banks that bought protection from AIG. It also wants any information related to efforts to persuade AIG to keep information about the payments secret. The deadline was 4 p.m. for the Fed to provide the documents, including Timothy F. Geithner's e-mails, phone logs and meeting notes tied to the bailout of AIG.

Bernanke guaranteed the Fed will make all necessary records and personnel available to the GAO. The GAO gained authority to audit the AIG after the AIG rescue law went in effect in May.

'Comprehensive Response To Questions'

Bernanke said in Tuesday's letter that a GAO audit would "afford the public the most complete possible understanding of our decisions and actions in this matter," and "provide a comprehensive response to questions that have been raised by members of Congress."

Treasury Secretary Geithner, who was head of the New York Fed when AIG was rescued in 2008, will testify Jan. 27 before the House Oversight Committee on the bailout.

Maybe Geithner wasn't involved in these particular emails, but it's hard to believe he didn't know that the details of AIG's bailout were being kept secret. If he opposed the Fed's secrecy, as treasury secretary, he had plenty of time to make his view known, and leverage to get the details released. Again, the taxpayers deserve to know: Who benefited from the $62 billion the government gave to AIG so it could pay off on bad bets made by financial institutions on mortgages that went sour.

Now that the Fed has welcomed an audit, the taxpayer's will finally get the details about who was paid and how much they received. The AIG payoffs were certainly a large part of the bailout that stayed behind back doors and it's good to see it make the light of day.
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