This latest revelation confirms the Fed’s commitment to secrecy and, although troubling, at this point should come at no surprise. The most important element is that AIG itself determined it should provide information about its swaps transactions (the ones it settled at 100 cents on the dollar at the New York Fed’s instigation and approved by Geithner) because it was an SEC required disclosure. Thus the Fed required AIG to violate SEC regs. The clear intent was to hide the extent of the subsidies that flowed from the Fed and Treasury to the recipient banks (recall AIG also received TARP funds). Charming.
The Federal Reserve Bank of New York, then led by Timothy Geithner, told American International Group Inc. to withhold details from the public about the bailed-out insurer’s payments to banks during the depths of the financial crisis, e-mails between the company and its regulator show.
AIG said in a draft of a regulatory filing that the insurer paid banks, which included Goldman Sachs Group Inc. and Societe Generale SA, 100 cents on the dollar for credit-default swaps they bought from the firm. The New York Fed crossed out the reference, according to the e-mails, and AIG excluded the language when the filing was made public on Dec. 24, 2008. The e-mails were obtained by Representative Darrell Issa, ranking member of the House Oversight and Government Reform Committee.
Yves here. And it gets even better:
AIG’s Dec. 24, 2008, filing was challenged privately by the U.S. Securities and Exchange Commission, which polices the adequacy of disclosures by publicly traded firms. The agency said in a letter to then-CEO Edward Liddy six days later that AIG should provide a Schedule A, which lists collateral postings for the swaps and names the bank counterparties that purchased them from the company. The Schedule A was disclosed about five months later in a filing.
And then we get patent rubbish from the Fed:
“Our position has always been that if AIG’s securities lawyers determine that AIG is legally obligated to make a particular filing or disclosure, then that is what AIG must do,” said Jack Gutt, a spokesman for the New York Fed, in an e- mailed statement.
Sure looks like a bald faced lie to me. AIG did include correspondence with outside counsel, but the Bloombers story does not indicate what it said. The Fed’s defense here may be that outside counsel did not “determine,” as in issue a formal opinion on the matter. If so, this verges on prevarication (to my knowledge, companies never get opinion letters on routine SEC filings (the only reason I can think of would be to create a paper trail as to why it was OK to withhold disclosure).