Scared Monkeys Discussion Forum

Congressman Demands AIG ‘Backdoor Bailout’ Documents

By Hugh Son

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The New York Fed and AIG were asked by Representative Darrell Issa to provide documents tied to the decision to settle $62 billion in credit-default swaps without imposing a “haircut” on the banks. Issa, the ranking member of the House Oversight and Government Reform Committee, requested e-mails, phone logs and term sheets in letters today.

The payments may “amount to nothing less than a backdoor bailout of AIG’s creditors,” the California Republican said in the letters, citing an Oct. 27 Bloomberg article about the New York Fed’s role in settling AIG’s obligations. There are “serious questions about the transparency, accountability and wisdom of the New York Fed’s actions.”

Goldman Sachs Group Inc., Societe Generale SA and Deutsche Bank AG were among AIG’s biggest trading partners on the $62 billion book of swaps retired in part with funds from the New York Fed. New York-based Goldman Sachs got more than $14 billion over 18 months, while Paris-based Societe Generale was paid $16.5 billion and Frankfurt-based Deutsche Bank got $8.5 billion.

Issa is seeking e-mails and meeting notes of Elias Habayeb, who was chief financial officer for the AIG division that oversaw the swaps and led efforts to get the banks to accept haircuts. He also wants documents from Geithner, former New York Fed Chairman Stephen Friedman, general counsel Thomas Baxter and Sarah Dahlgren, a senior vice president in charge of the team managing AIG, Issa said today in a statement.

“All of this begs the question why the New York Fed would not drive a better bargain for the American taxpayer,” Issa said.