Towns Subpoenas New York Fed for AIG Documents

Posted January 12, 2010 at 2:27pm

Oversight and Government Reform Chairman Edolphus Towns (D-N.Y.) on Tuesday subpoenaed the New York Federal Reserve Bank to turn over documents detailing payments that bailed-out insurance giant American International Group made to multiple trading partners.

“To help the Committee’s investigation of payments made by AIG to its counterparties, I am issuing a subpoena today to the Federal Reserve Bank of New York,— Towns said in a statement. “This subpoena will provide the Committee with documents that will shed light on how and why taxpayer dollars were used for a backdoor bailout.—

E-mails surfaced last week indicating that the New York Fed pressed AIG to avoid disclosing details to the public about the terms of the insurer’s bailout on credit default swaps, a decision that may have cost taxpayers billions of dollars. Towns is holding a hearing next week on the matter and is expecting testimony from Treasury Secretary Timothy Geithner, who led the New York Fed from 2003 to 2008.

The subpoena comes in response to the Federal Reserve barring the Office of Special Inspector General for the Troubled Asset Relief Program from providing requested documents to the committee. In response to a request by the committee to provide AIG-related documents, the SIGTARP wrote to the committee Tuesday that the Fed “directed us not to provide you with the documents that it has provided to us,— noting in the letter that they “regret the Federal Reserve’s position in this matter.—

“I was surprised that the Federal Reserve point-blank directed AIG to not disclose information,— said Kurt Bardella, spokesman for ranking member Darrell Issa (R-Calif.). “The headline is about the subpoena now, but the real issue is why the Federal Reserve is telling SIGTARP not to give anything out.—

Issa, who welcomed news of the subpoena, on Monday called on the New York Fed to hand over “all e-mails, documents, and other records and communications— relating to payments by AIG.

“The American people have a right to know the full story behind the New York Fed’s decision to pay billions of dollars to AIG’s counterparties and then conceal this decision from the public,— Issa said in a statement. “The New York Fed’s clear intent is to prevent this committee’s oversight of the AIG counterparty payments for as long as possible.—