New York Fed documents reveal more detail about AIG bailout
Sunday, January 24, 2010
On the frenzied day in September 2008 when the federal government bailed out insurance giant American International Group, Timothy F. Geithner logged dozens of calls with top Wall Street executives, Washington regulators, political leaders and even investor Warren Buffett.
At the time, the Treasury secretary was head of the Federal Reserve Bank of New York, which played a lead role in organizing AIG's rescue. His call logs, obtained by The Washington Post, are among 250,000 pages of documents the New York Fed recently turned over in response to a subpoena from the chairman of the House Committee on Oversight and Government Reform.
Records show that Geithner participated in nearly 70 calls between 7:45 a.m. and 10 p.m. on Tuesday, Sept. 16, as officials worked to stabilize AIG -- first through private loans and finally through public assistance. They feared the company's collapse might trigger other failures and endanger the financial system.
Geithner spoke most often to Federal Reserve Chairman Ben S. Bernanke and then-Treasury Secretary Henry M. Paulson Jr., as well as with AIG chief executive Robert Willumstad. He also shared numerous calls with top financial executives, including Lloyd Blankfein of Goldman Sachs, Jamie Dimon of J.P. Morgan Chase and Vikram Pandit of Citigroup.
At 10:16 a.m., documents show, Geithner spoke briefly with Berskshire Hathaway chief executive Warren E. Buffett. Buffett later said he was offered multiple chances to help rescue AIG before its bailout, but he declined.
In addition, Geithner spoke that day to regulators including Securities and Exchange Commission Chairman Christopher Cox, Office of Thrift Supervision Director John M. Reich and New York Insurance Superintendent Eric R. Dinallo. He also talked with New York Mayor Michael Bloomberg, Sen. Charles E. Schumer (D-N.Y.) and Charles O'Byrne, a top aide to New York Gov. David A. Paterson.
While Geithner's call list offers a fascinating glimpse into the hours leading up to the AIG bailout -- which eventually grew to $182 billion in aid -- the broader relationship between AIG and the New York Fed has drawn increased scrutiny on Capitol Hill.
Kurt Bardella, a spokesman for Rep. Darrell Issa (R-Calif.), the ranking Republican on the House oversight committee, said the latest documents, which include e-mails and meeting notes, show how intimately New York Fed officials were involved in AIG's every move. In one e-mail days after the bailout, a New York Fed official writes that AIG's general counsel was told that "future SEC filings, press releases, and other significant communications should be run" first by lawyers for the New York Fed.
"The New York Fed was running the show," Bardella said. "They were giving orders, demanding everything be run through them. They weren't just casual observers here."
The issue of AIG's payouts to trading partners remains one of the most controversial elements of the company's rescue. More than $62 billion flowed from the government through AIG and to its counterparties, which lawmakers have decried as "backdoor bailouts."
Bardella said the documents confirm that there was never a push to persuade AIG's trading partners to accept less than what they were owed. "The New York Fed never made any serious effort to try to obtain any concessions for the counterparties on behalf of the American people who were footing the bill," he said.
Republican and Democratic investigators on the House oversight committee on Thursday interviewed New York Fed general counsel Thomas C. Baxter Jr., who said that AIG's trading partners had quickly rejected taking a discount. Baxter told investigators he wasn't sure "why we even bothered," according to a person familiar with the interview.
That account echoes a report last fall by the special inspector overseeing the government's bailout program, which showed that AIG's top trading partners balked when asked if they would be willing to accept less. The report noted that Geithner "had little hope" that trying to win concessions from counterparties would succeed, as the bailout had removed the threat of bankruptcy and weakened AIG's leverage.
E-mails released earlier this month also showed that lawyers for the New York Fed advised AIG officials in late 2008 to withhold certain details in disclosures to the SEC, including information that could have revealed the names of banks receiving payments.
The New York Fed has defended its actions, saying that it had "assisted AIG in ensuring the accuracy of its disclosures and protected important U.S. taxpayer interests." Baxter has said that the company's disclosures complied with the law and that there was no effort to mislead the public. Treasury and New York Fed officials have said that Geithner played no role in the disclosure decisions because he was a candidate for the Treasury post at the time and had recused himself.
House Oversight Committee Chairman Rep. Edolphus Towns (D-N.Y.) has planned a hearing for Wednesday focusing on the AIG bailout. Geithner and Baxter are scheduled to testify, along with a former AIG executive and Neil M. Barofsky, the special inspector general for the bailout program.