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 American International Group show AIG wanted to disclose details about billions in payments it made to cancel financial deals with banks, including Goldman Sachs and Deutsche Bank. But lawyers for the New York Fed, which engineered AIG's bailout with the Bush administration's Treasury Department, told AIG to remove the information from a draft.
The e-mail exchanges, first reported by Bloomberg News, 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.
He questioned Fed and Treasury claims that the details of the bailout had to be kept secret so the country would be spared bank runs and other economic problems. He said the Finance Committee should hold hearings about the $700 billion financial bailout Congress passed at the peak of the financial crisis.
Treasury spokeswoman Meg Reilly said Geithner "played no role in these decisions" because his appointment as treasury secretary — then President-elect Barack Obama nominated him to the post in November 2008 — prevented him from participating in decisions about specific companies.
New York Fed General Counsel Thomas Baxter said the matter would not have been brought to Geithner's attention.
Republican staff on the House Committee on Oversight and Government Reform also are drafting a letter calling for new hearings at which Geithner would testify, said Kurt Bardella, a spokesman for Darrell Issa, R-Calif., the committee's top Republican. Issa's office released the e-mails Thursday.
Geithner was president of the New York Fed at the time of the e-mail exchanges. Executives from Goldman Sachs and other Wall Street banks that benefited from the AIG deals helped elect him to that position.
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.
The New York Fed has countered that officials were focused on defusing the worst financial crisis in generations. It says officials were trying to protect the value of the taxpayer investment. And it says paying the banks less or sharing more information could have sparked a global financial collapse.
Baxter said the Fed's financial stake made its input appropriate, "with the understanding that the final decision rested with AIG" and its lawyers.
"Our focus was on ensuring accuracy and protecting the taxpayers' interests during a time of severe economic distress," he said. "All information was in fact disclosed that was required to be disclosed by the company, showing that counterparties received par value. There was no effort to mislead the public."