The New York Fed pressured AIG in late 2008 to withhold from the public details about its massive and controversial payments to counter-parties, according to emails obtained by Bloomberg News. At the time, Timothy Geithner, now the Treasury Secretary, was New York Fed chair.
The federal government was heavily criticized last year for what some lawmakers have called a “backdoor bailout” of several large banks. It spent $182 billion all told to bail out AIG, but directed that the troubled insurance giant use those funds to pay back its counter-parties — including Goldman Sachs, Merrill Lynch, DeutscheBank, and other major banks — with whom it had engaged in credit default swaps.
The emails — which came to Bloomberg via Rep. Darrell Issa (R-CA), the ranking Republican on the House Oversight committee — show that Fed lawyers several times pressed AIG to disclose not information than the company at first suggested. For instance, in a November 2008 email, an AIG lawyer told the Fed that it planned to disclose details about Maiden Lane III, a vehicle for removing mortgage-linked swaps from its books. In response, Fed lawyer Brett Phillips wrote:
Do you think it might be feasible to hold off on the Maiden Lane III 8K and press release until next week? The thinking is that the Maiden Lane III closing will be a less transparent event, and it might be better to narrow the gap between AIG’s announcement and the New York Fed’s publication of term sheet summaries.
“We will of course be guided by your counsel,” AIG’s lawyer responded.