Geithner's Fed told AIG: Limit disclosure

The Federal Reserve Bank of New York, then led by Timothy Geithner, told American International Group Inc. to withhold details from the public about the bailed-out insurer's payments to banks during the depths of the financial crisis, e-mails between AIG and its regulator show.

AIG said in a draft of a regulatory filing that the insurer paid banks, which included Goldman Sachs Group Inc., 100 cents on the dollar for credit default swaps they bought from the firm. The New York Fed crossed out the reference, according to the e-mails, and AIG excluded the language when the filing was made public Dec. 24, 2008. The e-mails were obtained by Rep. Darrell Issa (R., Calif.) of the House Oversight and Government Reform Committee.

The New York Fed has said officials were focused on defusing the worst financial crisis in generations. It says officials were trying to protect the value of the taxpayer investment. And it says paying the banks less or sharing more information could have sparked a global financial collapse.

The New York Fed took over negotiations between AIG and the banks in November 2008 as losses on the swaps, which were contracts tied to subprime home loans, threatened to swamp the insurer weeks after its taxpayer-funded rescue. The regulator decided that Goldman Sachs and more than a dozen banks would be fully repaid for $62.1 billion of the swaps, prompting lawmakers to call the AIG rescue a "backdoor bailout" of financial firms.

"It appears that the New York Fed deliberately pressured AIG to restrict and delay the disclosure of important information," Issa said. Taxpayers "deserve full and complete disclosure under our nation's securities laws, not the withholding of politically inconvenient information."

Geithner was "officially recused from matters dealing with specific companies" at the New York Fed after his nomination for Treasury secretary Nov. 24, 2008, and he "began to insulate himself weeks earlier in anticipation of his nomination," said Meg Reilly, a Treasury spokeswoman. Geithner, who was tapped by President Obama, took the Treasury job in January 2009. Mark Herr, a spokesman for AIG, declined to comment.

Issa requested the e-mails from AIG chief executive officer Robert Benmosche in October after Bloomberg News reported that the New York Fed ordered the crippled insurer not to negotiate for discounts in settling the swaps. The decision to pay the banks in full may have cost AIG, and thus taxpayers, at least $13 billion, based on the discount the insurer was seeking.

AIG's Dec. 24, 2008, filing was challenged privately by the Securities and Exchange Commission.