FINSwire Jan 07 2010

Geithner Told AIG to Withhold Swap Disclosures

FINSwire Team

Though the bailout of American International Group was two years and one job ago for Timothy Geithner, newly revealed details of the negotiation process will likely continue to dog the current Treasury Secretary for some time to come.

Recently released emails between the insurance giant and the Federal Reserve Bank of New York, then led by Geithner, show the regulator told AIG to limit its disclosure about its payments to banks during the peak of the financial crisis, according to Bloomberg News.

In a draft regulatory filing, AIG said that the insurer paid banks, which detailed the names of the participating banks such as Goldman Sachs and Societe Generale, at full price. The regulator then crossed out references to the swap payments. The information was not included in the company's official filing with the Securities and Exchange Commission on December 24, 2008. In other emails the N.Y. Fed urges AIG to delay disclosing information about the swaps. AIG complied with the regulator's orders at times, but expressed concern.

"In order to make only the disclosure that the Fed wants us to make," AIG deputy counsel Kathleen Shannon wrote, "we need to have a reasonable basis for believing and arguing to the SEC that the information we are seeking to protect is not already publicly available."

Geithner and the N.Y. Fed have since been criticized for its decision to fully repay the banks for $62.1 billion of the swaps. AIG was dissuaded to pursue discounts from the banks. Paying the banks in full may have cost the company and taxpayers at least $13 billion, based on the discount the insurer was seeking, reports Bloomberg.

The emails were released to Representative Darrell Issa (R., Calif.), ranking member of the House Oversight and Government Reform Committee. Issa has been one of the loudest critics of the way the regulator handled the financial crisis.




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