UPDATE: "New York Fed Faces House Subpoena Over AIG Bailout (Update2)"
New York Fed Faces House Subpoena Over AIG Bailout (Update2)
January 12, 2010 3:56PM EST
By Hugh Son
Jan. 12 (Bloomberg) -- The Federal Reserve Bank of New York may be compelled to hand over documents related to American International Group Inc.'s government bailout after the chairman of a House oversight committee said he will issue a subpoena.
Edolphus Towns, the New York Democrat who runs the Oversight and Government Reform Committee, said in a statement that he will issue a subpoena today to get New York Fed records concerning the decision it made to fully reimburse AIG's partners. Banks including Goldman Sachs Group Inc. and Societe Generale SA were among beneficiaries of AIG's rescue, called by lawmakers a "backdoor bailout" for financial firms.
Continuation of breaking Bloomberg update/story
The New York Fed, run by Timothy Geithner when AIG was rescued, had resisted since November calls to provide documents without a subpoena, Darrell Issa of California, the ranking Republican on the oversight committee, said today in a letter. The New York Fed asked AIG to withhold and delay the disclosure of information about the bank payments to the public, according to e-mails provided by Issa to Bloomberg News last week.
"This subpoena will provide the committee with documents that will shed light on how and why taxpayer dollars were used for a backdoor bailout," Towns said in his statement...
The story continues on to tell us that the Federal Reserve has directed Neil Barofsky, the top government bailout (TARP) watchdog, to withhold confidential documents requested by Issa, today, according to documentation provided by the California Republican. Issa, apparently had asked Barofsky to provide AIG documents as part of the House investigation.
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Original Diary Title: SEC Ruled to Allow AIG to Keep Bailout Terms Secret for 10 Yrs
Original Diary Starts Here...
Well, it's all but official, IMHO. Over the past 24 hours, we've received another harsh reminder of the extreme level of regulatory capture in this country, along with the extent of the true insanity of the terms of the AIG (a/k/a Goldman Sachs') bailout, as determined between September 2008 through May 2009. Put another way, all the uproar about the secrecy of the AIG bailout is, essentially, a waste of time; or, at least that's what the notoriously inept and in-the-tank Securities and Exchange Commission would have us believe. Reuters, from late yesterday: "SEC order helps maintain AIG bailout mystery."
SEC order helps maintain AIG bailout mystery
By Matthew Goldstein
Reuters
Mon Jan 11, 2010 4:43pm EST
NEW YORK, Jan 11 (Reuters) - It could take until November 2018 to get the full story behind the U.S. bailout of insurance giant American International Group (AIG.N) because of an action taken last year by the Securities and Exchange Commission...
...In May, the SEC approved a request by AIG to keep secret an exhibit to a year-old regulatory filing that includes some of the details on the most controversial aspect of the AIG bailout: the funneling of tens of billions of dollars to big banks like Societe Generale, Goldman Sachs (GS.N), Deutsche Bank (DBKGn.DE) and Merrill Lynch.
The SEC's Division of Corporation Finance, in granting AIG's request for confidential treatment, said the "excluded information" will not be made public until Nov. 25, 2018, according to a copy of the agency's May 22 order.
The SEC said the insurer had demonstrated the information in the exhibit, called Schedule A, "qualifies as confidential commercial or financial information."
The story continues on to note that the SEC secrecy order covers a time period that concludes on the 10th anniversary of the Federal Reserve's Bank of New York branch's decision to setup the Maiden Lane III fund, the entity established to acquire $60 billion in (counterparty) collateralized debt obligations from 16 banks in the U.S. and Europe.
As noted by many (I've posted multiple times on this topic), more than $23 billion of this $60 billion related to Goldman Sachs' assets as well as third-party transactions for which Goldman would've been on the hook had the government not bailed-out AIG, specifically via this fund, at the time.
The "uproar" I mention above relates to the fact that it was secretly determined--and the information was withheld from the public--at the time that the government would pay 100 cents on the dollar to these 16 counterparites, even though it was widely understood throughout the financial services industry that the mark-to-market valuation of those assets was somewhere in the 20- to 40-cents-on-the-dollar range.
Perhaps the greatest irony of all of this, in case you've been living in a cave, is that the US government (that's the U.S. taxpayer, actually) owns 79.9% of AIG. So, the gist of this story is: We're reminded, today, that a taxpayer-owned entity obtained a ruling from the SEC to keep the terms of the payout of $60 billion in taxpayer funds secret...from us!
I'm sure we haven't heard the last of this story; but, IMHO, it gets more and more outrageous by the day.
And you wonder why I keep repeating that famous quote from Harry Truman?
"The only thing new in the world is the history you don't know."
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For more background on this complete travesty, checkout the following...
"3 Fraud Probes Target Goldman, AIG: Is It "The" Story of 2010?" (12/28/09)
"The AIG-Wall St. Bailout Corruption Story That Won't Go Away" (12/23/09)
"Breaking WSJ: Massive Goldman-AIG Bailout Conflict Of Interest" (12/12/09)
"New Economic Travesties: GDP Revision, Goldman/AIG, Reform" (11/24/09)
"Goldman's Eviscerated In NYT; Admits Geithner's 'AIGenerosity' (11/22/09)
Gretchen Morgenson, over at the NY Times: Revisiting a Fed Waltz With A.I.G." (11/22/09)
"Fed'l Reserve, IG Barofsky: Paulson, Treasury Lied To Public" (10/6/09)
One of Gretchen Morgenson's (NYT) best pieces of the entire recession: "Member and Overseer of the Finance Club" (4/27/09)
"Is it the largest betrayal of public trust in history?" (3/15/09)
"Doesn't Geithner's Middle Finger Look Just Like Paulson's?" (3/12/09)
"Wall St. Bailout: Is A Massive Scandal About To Unfold?" (3/8/09)
"On Geithner, NYT Leak and TARP II Drama: Kuttner Nails It" (2/13/09)
"Fed Refuses to Name Recipients of $2 Trillion Bailout" (11/10/08)
"Paulson/Fed Gives O.K. To Banks To Steal Your Money! (For real!)" (9/16/08)
"BREAKING: NY Times, 'AIG joins Merrill and Lehman in Wall Street Collapse'" (9/15/08)