A congressional panel, probing how money from the huge bailout of insurer American International Group Inc was spent, grilled Treasury Secretary Timothy Geithner on Wednesday about his role.

The top Republican on the House of Representatives Oversight and Government Reform Committee, Representative Darrell Issa, has accused the New York Federal Reserve Bank, when Geithner was chief, of trying to cover up payments AIG made to bank counterparties after receiving taxpayer aid.

Before the hearing started, Geithner greeted lawmakers and stopped briefly to talk with Issa before taking his seat.

With no sign of a smoking gun in hundreds of thousands of pages of documents to suggest Geithner was directly involved in decisions not to disclose details of $62 billion in payments to banks that held AIG credit default swaps, attention was expected to focus on why banks got 100 cents on the dollar.

Over $180 billion was eventually committed to bail out AIG, an action Geithner and his predecessor, former Treasury Secretary Henry Paulson, staunchly defended as vital to avert a catastrophic collapse of the stricken insurer that would have caused a much broader economic downturn.

But lawmakers clearly remained unhappy and, as the hearing opened, committee Chairman Edolphus Towns, a New York Democrat, vividly described why the AIG bailout made taxpayers see red.

In effect, the taxpayers were propping up the hollow shell of AIG by stuffing it with money, and the rest of Wall Street came by and looted the corpse, Towns said.

Geithner, who was president of the New York Fed before being nominated in November 2008 by President Barack Obama to take over at the Treasury, said he was not involved in any decisions relating to how AIG disclosed the bank payments.

I had no role in making decisions regarding what to disclose about the specific financial terms of Maiden Lane II and Maiden Lane III, and payments to AIG's counterparties, he said.

The Maiden Lane funds were special entities which the New York Fed set up to buy and hold securities underlying the credit default swaps and the securities may be sold in future.

Both Geithner and Ben Bernanke, chairman of the Federal Reserve -- the U.S. central bank -- have felt the backlash of public disgust at the amounts involved.

The spillover of anger threatened for a time to derail Bernanke's bid for a second term as U.S. Fed chief, though support appeared to be in place and an initial Senate vote on his nomination has been set for Thursday.

Towns had slightly softened his tone on AIG by Wednesday after Democratic staff members said that they had turned up no evidence in documents that Geithner had tried to encourage AIG to keep quiet about payments to banks.

Blame is about yesterday. Fixing the system is about the future, Towns said as he opened the hearing.

(Editing by James Dalgleish)