Geithner To Testify At House Inquiry On AIG, Fed Dealings

NU Online News Service, Jan.18, 2:42 p.m. EST

WASHINGTON–Treasury Secretary Timothy Geithner has been scheduled to testify before a House committee concerning controversial dealings between the Federal Reserve Bank of New York and American International Insurance.

His appearance Jan. 27 before the House Committee on Oversight and Government Reform was requested after e-mails revealed that while he headed the Fed, when bailout arrangements were made for AIG, the insurance conglomerate was kept from disclosing that it would pay trading partners 100 cents on the dollar on credit default arrangements that went bad.

The Fed has denied that Mr. Geithner played a role in having AIG keep that information from filings with the Securities and Exchange Commission.

As part of its inquiry into transactions making whole a number of foreign and domestic bank counterparties to American International Group's credit default swap transactions, the committee has issued subpoenas for documents.

The upcoming hearing will also examine other issues related to the collapse and federal rescue of AIG, Rep. Edolphus Towns, D-N.Y., chairman of the panel, said Friday in announcing that Secretary Geithner has agreed to appear.

"When average people were losing their homes and their jobs, the Bush administration decided to use taxpayer dollars to give a backdoor bailout to the biggest players on Wall Street," Rep. Towns said.

"Now we know that the people who delivered the bailout wanted to keep the details hidden from the public," Mr. Towns added.

"We need to understand why and how taxpayer dollars were used to bail out the same people who helped cause the financial crisis in the first place," he said.

Besides Mr. Geithner, others who have agreed to testify include Thomas Baxter, executive vice president and general counsel of the Federal Reserve Bank of New York; Neil Barofsky, special inspector general for the Troubled Asset Relief Program (SIGTARP); and Elias Habayeb, the former senior vice president and chief financial officer of the AIG Financial Services Division.

Also invited to testify were Henry Paulson, the former treasury secretary, and Stephen Friedman, the former chairman of the Federal Reserve Bank of New York (FRBNY) and current member of the Goldman Sachs board.