Ex-Treasury Boss Paulson to Address AIG Bailouts

By: Daniel Wagner AP Email
By: Daniel Wagner AP Email

WASHINGTON (AP) - A House panel probing the bailout of American International Group Inc. is sharpening its questions for two Treasury secretaries and a federal investigator who believes the Federal Reserve withheld documents.

Rep. Edolphus Towns, D-N.Y., said Tuesday that former Treasury Secretary Henry Paulson will appear at Wednesday's hearing, along with current Treasury Secretary Timothy Geithner, Special Inspector General for the Troubled Asset Relief Program Neil Barofsky and officials from the Federal Reserve Bank of New York. Towns is chairman of the House Committee on Oversight and Government Reform.

The committee is pressing for details about deals that sent billions from AIG's bailout to big banks including Goldman Sachs Group Inc. Lawmakers want to know why the New York Fed pressed AIG to be more secretive about the "backdoor bailouts" and other aspects of AIG's management.

Geithner approved the deals, which may have cost taxpayers billions more than necessary because he did not demand concessions from banks AIG did business with, according to Barofsky's earlier audit.

In a letter to Geithner last week, California Republican Darrell Issa, the committee's top Republican, asked for written responses to questions he has sidestepped in public statements on AIG. He asked for the specific date on which Geithner recused himself from decisions about the company, and for details about Geithner's involvement in the decision not to name the other banks that benefited.

Issa also wants Geithner to describe Treasury's conversations with labor unions in connection with the bailouts of automakers General Motors and Chrysler.

Barofsky will say is investigating whether the Fed withheld documents he should have received as part of his earlier audit. Separately, he is looking into e-mails in which New York Fed lawyers press AIG to remove details from disclosures with the Securities and Exchange Commission.

The new documents emerged after the Fed tried to block Barofsky from sharing documents with committee investigators. Towns subpoenaed the New York Fed - and received 250,000 pages related to the AIG transactions.

The e-mails show government lawyers pressuring AIG not to reveal details including which banks that benefited from the AIG bailout, which eventually totaled $182 billion.

The news comes as the Fed faces increased public pressure. Chairman Ben Bernanke is likely to face a Senate vote this week on his reappointment by President Barack Obama. The Senate Banking Committee is debating new limits on the Fed's power to supervise banks.

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