Bernanke invites an audit
Federal Reserve Chairman Ben S. Bernanke, apparently seeking to mollify critics as he awaits Senate confirmation on his reappointment, said Tuesday that he welcomed a government audit of the central bank’s role in the intensely unpopular bailout of American International Group Inc.
In a letter to the head of the Government Accountability Office, the investigative arm of Congress, Bernanke offered to “make available to the GAO all records and personnel necessary to conduct this review.”
Bernanke said the Fed already had disclosed large and significant information about its involvement in the government’s multibillion-dollar rescue of the giant insurance firm, engineered with the Treasury Department in September 2008.
But he said he would invite a full review by the GAO “to afford the public the most complete possible understanding of our decisions and actions in this matter, and to provide a comprehensive response to questions that have been raised by members of Congress.”
Bernanke didn’t say why he wrote the letter to Acting Comptroller General Gene L. Dodaro this week. Last May, Congress gave the GAO authority to review the bailout of AIG and other firms propped up during the financial crisis.
But a House committee has set a hearing next week to look into AIG’s payments to trading partners after its near collapse and into allegations that the Federal Reserve of New York, then led by current Treasury Secretary Timothy F. Geithner, restricted public disclosures of those activities.
Bernanke has defended the Fed’s emergency support of AIG as a distasteful but necessary step to prevent a worsening of the financial crisis.
In the letter, he said the central bank’s credit facility to AIG “is fully secured and should be fully repaid by Sept. 16, 2013, as the company reorganizes and unwinds its operations.”
Lyle Gramley, a former Fed governor, viewed Bernanke’s letter as a gesture showing that “he’s trying to be open and that the Fed has nothing to hide.” Even so, Gramley said, “I don’t think it means a lot.”
Sen. Bernie Sanders of Vermont, an independent, said in reaction to Bernanke’s letter: “The American people have a right to know exactly what happened to all of the money Ben Bernanke’s Fed put at risk, not just to bail out AIG but the entire financial sector. Trillions of taxpayer dollars are at stake.”
Bernanke’s term as chairman of the Fed expires at the end of this month. He has been reappointed for a four-year term by President Obama, and the Senate Banking committee last month voted 16 to 7 to send the nomination to the full Senate.
Despite opposition from Sanders and some other members, who are trying to block his appointment and broaden congressional oversight of the Fed’s activities, Bernanke is expected to be confirmed by the Senate, possibly as early as the end of this week.
The law isn’t clear on whether Bernanke could continue his role as chairman if the Senate didn’t vote on the nomination by the end of the month.
But on two prior occasions, most recently in 1996 when Alan Greenspan was running the Fed, the central bank’s board voted the nominee as chairman pro tem until the Senate took action.