Bachus: Committee Must Examine Why AIG Was Prevented From Disclosing Bailout Information
WASHINGTON,
January 8, 2010 -
"There is no more urgent business before the Committee and this hearing should be given the highest priority."
January 7, 2010
- Congressman Spencer Bachus, the top Republican on the Financial Services Committee, wrote to Chairman Barney Frank yesterday urging him to convene a hearing to examine the latest report that the Federal Reserve Bank of New York, under the leadership of Secretary Geithner, prevented AIG from disclosing information and documents related to its government bailout.
Bachus said, "Unfortunately, disclosure and transparency have been sorely lacking when it comes to congressional and public review of the circumstances surrounding AIG's bailout. For months, the public was prevented from knowing the names of AIG's counterparties and the extent to which AIG fulfilled its obligations to those firms. We learned today that it was the New York Fed that stepped in to prevent public disclosure of this information by deleting the counterparty names and payment information from AIG's draft regulatory filing. This calculated attempt to withhold important information from the public and market participants runs counter to the principles of our capital markets."
Ranking Member Bachus first questioned Secretary Geithner for information on whether foreign and domestic counterparties were paid 100 cents on the dollar during Committee hearings held on March 24th and March 26th 2009. Bachus also questioned Geithner regarding reports that U.S. banks are being asked to take haircuts. On November 23, 2009, Bachus sent this letter to Treasury Secretary Geithner asking for additional information regarding the extent to which AIG has met its obligations to U.S. banks that are creditors.
Bachus said, "As you know, since March 2009 I have raised concerns, and called for hearings, regarding the disparate treatment of U.S. banks and foreign institutions by insurance giant American International Group (AIG). ... In November 2009, I wrote to Secretary Geithner requesting an explanation of the extent to which AIG met its obligations to creditors that are U.S. banks. Unfortunately, to this day, Secretary Geithner has provided no explanation."
"There is no more urgent business before the Committee and this hearing should be given the highest priority," Bachus stated.
NOTE: Click here to view a copy of the letter.
Bachus has called for the Financial Services Committee to convene hearings on AIG's counterparty payments since March 2009. Bachus wrote to Chairman Frank to request hearings on March 25, 2009, July 17, 2009, and November 19, 2009.
Transcript of Ranking Member Bachus questioning Secretary Geithner during Financial Services Committee hearings follow:
Transcript from March 24, 2009 Hearing:
BACHUS: Thank you.
Secretary Geithner, on September 14th, you and Secretary Paulson met with AIG to discuss Lehman's failure and their worsening condition.
GEITHNER: We had a series of meetings in the days preceding the action by the Fed on the 16th...
BACHUS: On the 16th, OK.
GEITHNER: ... with AIG and a range of other financial institutions. As the chairman said, you know, the -- the world was going through a -- a...
BACHUS: Oh, yeah, I understand that, but you met with them and as a result of that -- those meetings, September 16th there was a government intervention supervised, coordinated, and led by the New York Fed, and you were president of the New York Fed.
GEITHNER: I was president of the New York Fed.
BACHUS: At September 16th, the government became the 79.9 percent owner of AIG, is that correct.
GEITHNER: That is correct.
BACHUS: All right. Then there was a $85 billion government guarantee that went to AIG -- or funds, is that correct?
GEITHNER: That's correct.
BACHUS: Then on October the 8th, a good amount of that money was paid to the counterparties. is that correct?
GEITHNER: Well, again, the purpose of the intervention was to prevent default by AIG because the -- our judgment was the consequences of default would have been catastrophic to the American economy, and so...
BACHUS: Sure. I understand that.
GEITHNER: So AIG was able to, as a result of the intervention -- to meet a full range of its obligations as a large complex financial institution.
BACHUS: Sure, I understand that. But what I am saying is that took over on September 16th, then on October the 8th began to pay the counterparties off.
GEITHNER: Well, again, throughout that period of time -- and this was critically important to the stability of the financial system -- we wanted to make sure AIG was able to meet its commitments.
BACHUS: I understand that, to pensioners, to retirees, to...
GEITHNER: Municipalities.
BACHUS: ... Municipalities.
GEITHNER: To banks.
BACHUS: But what I'm saying is within about two weeks these payments were made to the counterparties. I'm
