Issa: AIG Investigation Just Getting Started

January 29, 2010 (LPAC)—Following Wednesday's hearing of the House Committee on Oversight and Government Reform examining the government's role in bailing out AIG counterparties and hiding its details from the American public, Ranking Member Darrell Issa (R-CA) made public a document (Schedule A) that the Federal Reserve Bank of New York (FRBNY) wanted kept confidential by the Securities Exchange Commission (SEC) until 2018. This 5-page document is a list of approximately 400 worthless credit default swap deals that were paid at 100% of par at the insistence of Fed Reserve Chairman Ben Bernanke and New York Federal Reserve Bank Chairman Timothy Geithner.

Schedule A includes the names of all of AIG's counterparties, the identification numbers of each transaction, and the prices at which Maiden Lane 3 was purchasing the underlying assets. In the end, AIG's filings on December 2, 2008, and December 24, 2008, included the agreements between AIG and ML3 but omitted Schedule A. The Schedule A was finally submitted under pressure from the SEC, but was kept "in a special area at the SEC where national security related files are kept."
Issa also released a 22-page report: "Public Disclosure as a Last Resort: How the Federal Reserve Fought to Cover Up the Details of the AIG Counterparties Bailout from the American People."

In this second document, several emails further establish that Geithner lied under oath when he stated that he had recused himself from the AIG matter.

* On November 6, 2008, Sarah Dahlgren, the FRBNY's lead staff member in AIG's operations, emailed Geithner with a proposed statement regarding AIG's upcoming equity capital raise for Geithner's approval: "If you are good with this, ... we would also make sure that the company sticks to this line ...."

* On November 13, Geithner received a report on AIG's restructuring that would be sent to Congress, which Geithner had asked to personally review. Sophia Allison, a staff member of the Federal Reserve's Board of Governors, e-mailed the draft congressional report to several Federal Reserve staff. Michael Nelson, a staff member of the FRBNY, fowarded Allison's email to Geithner with the following message: "Tim — this is the draft EESA-required filing on AIG that the Board owes the Hill, as you requested."

* In addition, Geithner's meeting logs show that he had at least six formal meetings with the top FRBNY staff members about AIG-related issues between November 4, 2008, and November 21, 2008.

* Also, Geithner did not respond to a request from Issa for an interview before the hearing. He did, however, meet with Congressman Cummings together with Tom Baxter, General Counsel of the FRBNY, on Friday January 15, 2010, even though Baxter was scheduled to be a witness at the hearing as well. It is Baxter, who has claimed that Geithner had recused himself from AIG case.

In releasing these documents, Issa said: "It's not conjecture, its not speculation, it's fact, the New York Fed gave a back-door bailout to AIG's counterparties and then tried to cover it up. The veil of secrecy that swept through the Fed embraced a mentality that treated transparency as a dispensable luxury rather than a moral imperative."

Regarding Secretary Timothy Geithner's testimony addressing the NYFRB's efforts to limit public disclosure, Issa said, "If he didn't know, he should have and no one has answered the question as to why the New York Fed were so adamant at keeping details of the counterparty deal confidential. If he or anyone else thinks that this investigation will stop after today's hearing, they are completely mistaken. There has been a widespread effort by officials at the NY Fed to thwart transparency and working with the SIGTARP, we will continue to pursue this investigation for as long as it takes to get the truth. Unfortunate as it may be for those who acted deliberately to deceive the American people, there is no statute of limitations in our pursuit of transparency."

Check out my website. http://www.icelandcrash.com