WASHINGTON — Republicans in both houses called Thursday for hearings to investigate revelations that the Federal Reserve Bank of New York, led at the time by Treasury Secretary Timothy Geithner, pushed for greater secrecy on controversial bailout deals.
E-mails between lawyers for the New York Fed and bailed-out insurance conglomerate American International Group show AIG wanted to disclose some details about billions in payments it made to banks to cancel financial deals.
But lawyers for the New York Fed, which engineered AIG’s bailout with the Bush administration Treasury Department, told AIG to remove the information from a draft.
The e-mail exchanges occurred at the height of the financial crisis in the fall of 2008.
“People at the grass roots are reckoning with the realities of a battered economy every day, so arguments that clearly benefit the big banks ought to be studied,” said Iowa Sen. Charles Grassley, the top Republican on the Senate Finance Committee.
In a statement, Grassley questioned Fed and Treasury Department claims that the details of the bailout had to be kept secret so that the country would be spared bank runs and other economic problems. He said the Finance Committee should hold hearings about the $700 billion bailout Congress passed at the peak of the financial crisis.
“The mind-set to cover up bad news played a big part in creating the financial crisis in the first place,” Grassley said.
A watchdog report has said Geithner and the New York Fed mismanaged the AIG rescue, potentially handing billions more than necessary to banks that have since recovered and are again paying record bonuses.
Rep. Darrell Issa, R-Calif., said the information raised new doubts about Geithner’s qualifications.
“This begs the question, knowing what we know now: Would he have even been confirmed?” he said in a statement.
The names of the banks that benefited from AIG’s bailouts earlier were kept secret by the Fed’s Board of Governors.
