[ot] Geithner's Fed told AIG to hide "backdoor bailout"

Subject:	[ot] Geithner's Fed told AIG to hide "backdoor bailout"
Date:	Fri, 08 Jan 2010 16:30:50 GMT

http://www.homelandstupidity.us/2010/01/07/geithners-fed-told-aig-to-hide-backdoor-bailout/

Geithner's Fed told AIG to hide "backdoor bailout"
January 7, 2010 @ Michael Hampton

The Federal Reserve Bank of New York, during its $180 billion bailout of
American International Group, Inc., instructed AIG to omit details of its
purchase of certain toxic assets from a December 24, 2008, Securities and
Exchange Commission filing, according to e-mails between the company and
the Fed released Thursday.

Using bailout money provided by the Fed, AIG paid a number of banks 100
percent of the face value of credit-default swaps, contracts tied to
subprime home loans, at a time when other institutions were negotiating
deep discounts for the paper. The names of the banks were also omitted
from the SEC filing.

The information was finally disclosed in March 2009 after the SEC
challenged AIG's filing, prompting lawmakers and analysts to call the
transactions a "backdoor bailout" of the banks. Topping the list of banks
which benefited from the backdoor bailout of their toxic paper were
Goldman Sachs and Societe Generale SA.

AIG New York

The e-mails, released Thursday by Rep. Darrell Issa (R-Calif.), ranking
member of the House Oversight and Government Reform Committee, show the
Fed wanted a number of other details about the AIG bailout withheld or
their disclosures delayed.

The coverage from Bloomberg News has all the gory details, including a
non-denial denial that Treasury Secretary Timothy Geithner, who was then
chairman of the New York Fed, had anything to do with the cover-up.

Rep. Barney Frank (D-Mass.) has called the disclosure "troubling" and
plans to hold hearings on the issue, though he publicly maintains full
confidence in Geithner.

"The new details revealed today regarding AIG's bailout in 2008 come as no
surprise to those of us who believe that the American people deserve full
transparency from the Federal Reserve," Rep. Ron Paul (R-Texas) said in a
statement. "My strong suspicion is that secret arrangements between
cronies like this are not an anomaly, but the norm."

The Fed, as you'll recall, fought disclosure of the information, claiming
that it would erode market confidence. No such thing happened, of course.

If dollar investors aren't already spooked enough to run like hell, it's
hard to see what would convince them that the dollar isn't nearly as safe
as they seem to think.

"The status quo has made it entirely too easy and too tempting to behave
recklessly with public funds in total secrecy," Paul said. "The system
needs radical change, but we should start with honesty, transparency and
accountability to the American people about how their money is being
handled."

Update: TheNew York Times reported Friday that the Treasury department
explicitly denied Geithner had anything to do with it. TheTimes quoted
Treasury spokeswoman Meg Reilly as saying Geithner "played no role in
these decisions and indeed, by Nov. 24, he was recused from working on
issues involving specific companies, including A.I.G."

["AIG New York" photo by eflon; CC BY 2.0]

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