U.S. Treasury Secretary Timothy Geithner has been called to testify before a congressional committee about reports that the New York Federal Reserve Bank allegedly pressured insurance monolith AIG to keep secret the terms of generous payments it made to partner banks after taking taxpayer bailout money to head off its own demise.
Geithner had just been nominated for the top treasury post and was still head of the New York Fed at the time of the alleged cover-up. The Washington Post has reported that emails released last week show the bank directed AIG to withhold from federal regulators details of AIG’s transfer of more than $62 billion of its own initial $85 billion federal bailout to large U.S. and European banks.
These included AIG trading partners Goldman Sachs and others who received full value after losing massive risky bets on so-called credit-default swaps. Delaying the disclosure of this generous private use of taxpayer dollars allowed Geithner to avoid questions about it during his Senate confirmation hearings a year ago, McClatchy reported.
Timothy F. Geithner
Friday, after the New York Fed’s actions were disclosed earlier in the week, Rep. Spencer Bachus, top GOP member of the House Financial Services Committee, and Democrat Elijah Cummings of the House Oversight and Government Reform Committee, asked their panels to hold hearings on the matter.
The same day, New York Democrat Edolphus Towns, chairman of the oversight committee, said he will convene such a hearing sometime next week. Both Geithner and the New York Fed’s general counsel, Thomas Baxter, are among the witnesses invited to testify.
The White House responded by saying Geithner was not involved in a cover-up, that discussions of the AIG arrangements had not risen to his level as head of the New York Fed, and that President Obama continues to have full confidence in his treasury boss.
A treasury spokesperson declined to say whether Geithner would accept his invitation to testify.