By Silla Brush - 01/08/10 05:28 PM EST
Democratic and Republican lawmakers on Friday called on Treasury Secretary Timothy Geithner to testify about whether government officials improperly pressured American International Group during the bailout.
Geithner has come under renewed criticism this week following concerns that the Federal Reserve instructed AIG not to disclose how billions of taxpayer dollars would be used during the bailout.
continue to believe that a comprehensive review of the rise and fall of
AIG, and the involvement of counterparties can provide a useful vehicle
to understanding how inadequate regulations, cheap money, risky
business deals, and in some instances, corruption led to the current
economic crisis,” Towns said in a statement.
Geithner was head of the Federal Reserve Bank of New York at the time, but Meg Reilly, Treasury spokeswoman, said he had recused himself during those negotiations. The AIG bailout remains one of the most controversial aspects of the government's many efforts to support the financial industry and it continues to dog Geithner in particular.
"Matters of AIG securities law disclosure were not brought to the attention of the president of the Federal Reserve Bank of New York," Thomas Baxter, general counsel at the New York Fed, said in a statement on Friday.
AIG was crippled under tens of billions of dollars in soured derivatives transactions. Major American and foreign banks received tens of billions of dollars during the bailout of AIG and government watchdogs criticized the Fed for failing to negotiate better terms during the bailout.
In draft regulatory filings obtained by Rep. Darrell Issa (R-Calif.), Fed officials late in 2008 crossed out information that would have disclosed AIG's counterparties were being paid in full with taxpayer money.
The regulatory filings in early and late December indicate the amount of money being paid to counterparties in general. But the filings did not say explicitly that the money represents 100 percent of the derivatives commitments, nor do they list the specific counterparties that received money.
Those specific firms were made public only in March 2009 under congressional pressure.
Rep. Elijah Cummings (D-Md.) on Friday called for a full investigation into the issue and for testimony from Geithner.
“In all cases, the money provided by the [Federal Reserve Bank of New York] to AIG came from U.S. taxpayers and taxpayers had the right to know at the time the money was being provided how it was to be used," Cummings wrote.
Rep. Spencer Bachus (R-Ala.) urged House Financial Services Committee Chairman Barney Frank (D-Mass.) to schedule a hearing into Geithner's role. Issa and Rep. Patrick McHenry (R-N.C.) had urged Towns to request testimony from Geithner through subpoena if necessary.
The Treasury Department maintains that Geithner was not involved in the negotiations at the time.
"Geithner played no role in these decisions and indeed, by November 24, he was recused from working on issues involving specific companies, including AIG," Reilly said.
This story was updated at 9:30 p.m.