Thursday, January 07, 2010

Geithner wants zipped lips on AIG swaps

Tim Geithner and the New York Fed told AIG to limit their swaps disclosure. The saga continues and Bloomberg has the details:

Federal Reserve Bank of New York, then led by Timothy Geithner, told American International Group Inc. to withhold details from the public about the bailed-out insurer’s payments to banks during the depths of the financial crisis, e-mails between the company and its regulator show.

AIG said in a draft of a regulatory filing that the insurer paid banks, which included Goldman Sachs Group Inc. and Societe Generale SA, 100 cents on the dollar for credit-default swaps they bought from the firm. The New York Fed crossed out the reference, according to the e-mails, and AIG excluded the language when the filing was made public on Dec. 24, 2008. The e-mails were obtained by Representative Darrell Issa, ranking member of the House Oversight and Government Reform Committee.

The New York Fed took over negotiations between AIG and the banks in November 2008 as losses on the swaps, which were contracts tied to subprime home loans, threatened to swamp the insurer weeks after its taxpayer-funded rescue. The regulator decided that Goldman Sachs and more than a dozen banks would be fully repaid for $62.1 billion of the swaps, prompting lawmakers to call the AIG rescue a “backdoor bailout” of financial firms."

Timmy, you class act, you. Still, this latest bit of news shouldn't come as too much of a shock to anyone who's been following these bailout shenanigans.

In fact, this latest Bloomberg piece on the email exchanges between AIG and the New York Fed follows up earlier reports
by Richard Teitelbaum and Hugh Son on the AIG swaps deal from October '09.

Still, officials at AIG object to the secrecy that surrounded the transactions. One top AIG executive who asked not to be identified says he was pressured by New York Fed officials not to file documents with the U.S. Securities and Exchange Commission that would divulge details.

“They’d tell us that they don’t think that this or that should be disclosed,” the executive says. “They’d say, ‘Don’t you think your counterparties will be concerned?’ It was much more about protecting the Fed.” "

Read all about it and pass the news along.

Related articles and posts:

1. Fed told AIG not to disclose swap details - Dealbook.

2. Marc Faber interview: rotten apples in DC - Finance Trends.

3. Jim Rogers: "Geithner's clueless" - Finance Trends.

4. Geithner's gift to Pimco, BlackRock, et al - Finance Trends.