Ex-Treasury secretary Paulson, Friedman to testify in House about AIG bailout
Wednesday, January 27, 2010
Former Treasury secretary Henry M. Paulson Jr. and Stephen Friedman, former chairman of the Federal Reserve Bank of New York, have agreed to testify Wednesday on Capitol Hill about the government bailout of American International Group.
They will join Treasury Secretary Timothy F. Geithner, who headed the New York Fed at the time of AIG's rescue, in testifying before the House Committee on Oversight and Government Reform. Chairman Edolphus Towns (D-N.Y.) scheduled the hearing this month after documents raised new questions about the bailout of the insurance giant.
Lawmakers have recently homed in on two key issues -- the decision to compensate AIG's trading partners at 100 cents on the dollar and the New York Fed's advice to AIG to limit disclosures about the identities of those counterparties and the amounts they received. The federal bailout of AIG, which grew to a more than $180 billion commitment, has attracted controversy and hounded Paulson, Geithner and other officials who helped orchestrate the troubled insurer's rescue in September 2008.
Others scheduled to testify Wednesday include Neil M. Barofsky, the special inspector general of the government's Troubled Assets Relief Program; Elias Habayeb, the former chief financial officer of AIG's financial services division; and Thomas Baxter, the New York Fed's general counsel.
According to advance testimony provided to lawmakers and obtained by The Washington Post, Paulson plans to assert that he, Geithner, Bernanke and others acted properly in bailing out AIG and that "a failure would have collapsed our financial system and devastated millions of Americans."
In addition, Baxter plans to say the New York Fed tried to gain concessions from AIG's trading partners in November 2008 but compensated them in full partly because of a lack of leverage but also to prevent a potentially catastrophic downgrade of AIG's credit rating. He also plans to testify that the New York Fed's input about AIG's disclosures was "motivated by concern for accuracy and precision" and that AIG was "wholly responsible for the content of its SEC filings."
Meanwhile, Republicans pushed Tuesday for more information from Federal Reserve Chairman Ben S. Bernanke, who also played an key role in the rescue of AIG. Bernanke and the New York Fed have expressed support for a comprehensive federal audit of the AIG bailout.