Bernanke invites 'full review' by GAO of Fed's AIG bailout
Wednesday, January 20, 2010
Federal Reserve Chairman Ben S. Bernanke said Tuesday that he would "welcome a full review" by government investigators into the federal bailout of the troubled insurance giant American International Group.
In a letter to Gene L. Dodaro, director of the Government Accountability Office and acting U.S. comptroller general, Bernanke said the Fed would make available "all records and personnel necessary" if the GAO undertook such a review. Bernanke noted that the Fed already had made "a large amount of information" about the AIG bailout public, including regular reports about outstanding loan balances, and that it had provided testimony and documents to members of Congress and other oversight bodies.
"It is important that the Congress and the public understand," Bernanke wrote, "that, in our actions regarding AIG, the Federal Reserve and the Treasury acted in the best interests of the United States to preserve the financial system and to protect households and businesses from potentially calamitous effects on the U.S. economy, while doing everything possible to protect the American taxpayer."
Bernanke's letter came after the House passed a bill that would grant new authority to extensively audit the Fed and as Senate lawmakers consider legislation that would strip the agency of its supervisory powers. In addition, the House oversight committee is preparing to hold a hearing next week to examine the Federal Reserve Bank of New York's role in advising AIG to limit disclosures about billions of dollars it paid to other firms during the height of the financial crisis.
Committee Chairman Edolphus Towns (D-N.Y.) last week issued a subpoena to compel the New York Fed to hand over all documents related to its decision to direct AIG to pay out billions of dollars to big banks during the financial crisis, as well as its input on what to disclose about those payments.
On Tuesday, the New York Fed backed Bernanke's call for a comprehensive review by the GAO and announced that it had delivered more than 250,000 pages of documents related to the AIG rescue to the House oversight committee.
"We are in favor of a full and objective review of our actions and look forward to the opportunity to document for the public and members of Congress our involvement in AIG," New York Fed President William C. Dudley said in a statement. "All of the Federal Reserve's actions regarding AIG were undertaken to protect the American people from an even more severe economic downturn and to safeguard U.S. taxpayers' interests in the company."
Treasury Secretary Timothy F. Geithner headed the New York Fed at the time of the AIG bailout but has said he played no role in the disclosure decisions. He is scheduled to testify at next week's hearing on Capitol Hill, along with representatives from the New York Fed and AIG.