New York Federal Reserve officials debated in November 2008 whether the terms of the bailout of American International Group could be kept secret from the public and whether securities regulators would even permit it to do so, according to emails obtained by Reuters on Friday.
The emails, given to Capitol Hill lawmakers by the New York Fed, revealed that some officials at the New York Fed were surprised and displeased by AIG's plan to file an exhibit with the U.S. Securities and Exchange Commission that would provide specific details of the Fed-engineered rescue package.
Lawmakers have labeled the AIG rescue a backdoor bailout to 16 large U.S. and European banks.
In a November 24, 2008 email, Alex Latorre, a New York Fed assistant vice president, asked: But can they make these docs public without our consent? Aren't we parties to this and shouldn't we have a say?
Paul Whynott, a New York Fed vice president, responded, I noted that making the documents public was not contemplated in our last turn.
The email exchange will provide more ammunition for critics who contend that some officials at the New York Fed sought to keep the public in the dark about terms of the AIG bailout.
The emails were included in the mountain of documents the New York Fed turned over this week to the House Committee on Oversight and Government Reform.
In response to a request for comment, New York Fed spokeswoman Deborah Kilroe pointed to a January 19 statement in which New York Fed president William Dudley said, We are in favor of a full and objective review of our actions.
It has become alarmingly clear that public disclosure was the last thing on the minds of the government officials charged with protecting the taxpayers' interests, said Rep. Darrell Issa from California, the ranking Republican member on the House Oversight Committee.
That committee, led by Rep. Edolphus Towns, a New York Democrat, will hold a hearing next Wednesday on the AIG bailout.
The hearing will focus on the New York Fed's role in putting together the bailout, which funneled tens of billions to 16 banks that bought credit default swaps from AIG. Those insurance-like derivatives guarded against defaults on hundreds of securities backed by subprime mortgages.
One of the main witnesses at the hearing will be Treasury Secretary Timothy Geithner, who was the president of the New York Fed at the time of the bailout.
Geithner has said that he was not privy to the discussions about what information AIG should or should not release to the public and the SEC.
The new round of emails also show that the idea of asking the SEC to grant confidential treatment to the controversial filing originated with the New York Fed, and not with AIG.
Officials with the New York Fed raised the idea of asking the SEC for confidential treatment, even though one of its lawyers said in an email that he considered it highly unlikely that the SEC would grant the request.
The New York Fed lawyer said in one of the emails that trying to get the SEC to sign-off on the confidential treatment request could be a gigantic project.
Last May, the SEC did grant AIG's request for confidential treatment for the portion of the filing containing specific information about mortgage-related securities that banks, including Goldman Sachs , Societe Generale and Deutsche Bank , sold to a Fed-sponsored entity as part of the bailout.
The confidential treatment, approved by the SEC, for the redacted portions of the exhibit will last until November 2018.
SEC spokesman John Nester said the SEC granted confidential treatment only after requesting that AIG publicly disclose the list of banks that benefited from the AIG bailout and the amounts of the money each bank received in the deal.
Documents have shown that the SEC allowed AIG to keep confidential the CUSIP, or trading ID, numbers, for each security on which the insurer wrote a CDS contract.
The SEC also permitted AIG to keep confidential the face value of each individual security it insured against default.
Critics contend that without that identifying information, it is difficult to determine which banks among those that benefited from the AIG bailout held the worst performing securities.
In the bailout, all the banks were made whole regardless of how much value each of AIG-insured securities had lost.
Congressman Issa, one of the harshest critics of the bailout, said the New York Fed had assumed a command and control relationship with AIG and that it had sought to limit AIG's disclosures about the rescue.
(Reporting by Matthew Goldstein; Editing by Toni Reinhold)