NY Fed Lawyer Says AIG ‘Didn’t Warrant’ Geithner Attention

Timothy Geithner, the former Federal Reserve Bank of New York president, wasn’t aware of efforts to limit American International Group Inc.’s bailout disclosures because the regulator’s top lawyer didn’t think the issue merited his attention, the attorney told lawmakers.
“Matters relating to AIG securities law disclosures were not brought to the attention of Mr. Geithner,” Thomas Baxter, general counsel of the New York Fed, said yesterday in a letter to Representative Darrell Issa, a California Republican, and Edolphus Towns, Democrat of New York. “In my judgment as the New York Fed’s chief legal officer, disclosure matters of this nature did not warrant the attention of the president.” Geithner, who helped orchestrate the bailout of AIG when he led the New York Fed, is now Treasury Department secretary.
Geithner and Baxter were asked yesterday to testify before the House Oversight and Government Reform Committee about e- mails from the New York Fed in 2008, when Geithner led the regulator, asking AIG to withhold data about payments to banks. Firms including Goldman Sachs Group Inc. and Societe Generale SA were fully reimbursed on swap guarantees from AIG, prompting Issa to call its rescue a “backdoor bailout” of banks.
Issa said it was “staggering” that Baxter felt he didn’t need to notify Geithner about discussions with New York-based AIG about what records the insurer should make public in Securities and Exchange Commission filings. Baxter’s “letter raises more questions on the inner-workings of the New York Fed during one of the most pivotal periods in our nation’s history,” he said in an e-mail.
E-Mail Correspondence
Treasury spokeswoman Meg Reilly said this week that while at the New York Fed, Geithner “was recused from working on issues involving specific companies, including AIG,” after he was nominated Nov. 24, 2008, for the secretary post. The e-mail correspondence between the New York Fed and AIG that was released this week by Issa’s office begins on Nov. 24, 2008.
Geithner made the decision to pay banks 100 cents on the dollar for their AIG swaps tied to subprime mortgages, according to a November 2009 audit from Neil Barofsky, the special inspector of the U.S. Troubled Asset Relief Program.
AIG said in a draft of a regulatory filing about the swaps that the insurer fully reimbursed banks to retire the contracts. The New York Fed crossed out the reference, according to e-mails, and AIG excluded the language when the filing was made public on Dec. 24, 2008.
Jack Gutt, a spokesman for the New York Fed, didn’t immediately return a phone call seeking comment late yesterday.
Towns, who is chairman of the oversight committee, said in a statement the hearing will probably be the week of Jan. 18.