House hearing today on AIG rescue
The controversy over American International Group Inc.’s $182.5-billion bailout is intensifying with a government watchdog launching an investigation into potential misconduct in the disclosure of the rescue’s details and a House committee preparing to grill the current and former Treasury secretaries about them today.
Treasury Secretary Timothy F. Geithner has been under fire for his role in the bailout of the giant insurer, which he helped engineer as president of the Federal Reserve Bank of New York in the fall of 2008.
Republicans on the committee, led by Rep. Darrell Issa (R-Vista), have hammered Geith- ner and other government officials for agreeing to pay customers such as Goldman Sachs Group Inc. all they were owed on insurance they had bought from AIG for their investments.
They also have released e-mails showing that the New York Fed pressed AIG to withhold information about the $62 billion paid to AIG’s so-called counter-parties, which Issa has called a “back-door bailout” for Goldman and other large financial firms.
In excerpts of his prepared testimony, Geithner said the steps he and government officials took to rescue AIG “were motivated solely by what we believed to be in the best interests of the American people.”
“We did not act to protect the financial interests of individual institutions,” he said. “We acted because the consequences of AIG failing at that time, in those circumstances, would have been catastrophic for our economy and for American families and businesses.”
Under pressure from Republicans, Rep. Edolphus Towns (D-N.Y.), chairman of the House Oversight and Government Reform Committee, subpoenaed 250,000 pages of documents from the Fed and called Geithner to testify at today’s hearing.
The committee said Tuesday that former Treasury Secretary Henry M. Paulson, another key player in the bailout, also would testify.
In his prepared testimony, Paulson said he strongly supported the decision to bail out AIG and that Geithner had acted properly.
Treasury and Fed officials have said that Geithner was not involved in discussions about which information would be disclosed in AIG’s filings to the Securities and Exchange Commission. When those decisions were made, Geithner had recused himself from AIG issues because he was in line to become Treasury secretary, officials said.
Democratic committee staff said they found no evidence in the documents of Geithner’s involvement. Republicans said Geithner’s role in what they called the “AIG cover-up” remained unclear, and planned to press him on it today.
In testimony prepared for the hearing, Thomas C. Baxter Jr., general counsel of the New York Fed, defended the bailout decisions and denied there was any attempt at a cover-up.
Baxter said the Fed did not have the time or leverage to try to force the firms to take less money because of the potential “catastrophic consequences” of an AIG failure.
Neil Barofsky, the special inspector general for the Troubled Asset Relief Program, has launched an investigation into whether there was any misconduct involving disclosures by AIG and the Fed about the bailout and whether the Fed has cooperated fully with his office in providing all the relevant documents.
jim.puzzanghera@
latimes.com
