Geithner to testify on AIG

House of Representatives Oversight Committee Chairman Edolphus Towns, who called the decision to pay 100 cents on the dollar to banks who bought credit default swaps from AIG a backdoor bailout, said Geithner had agreed to testify before his panel on January 27.

Prodded by the panel's top Republican, Rep. Darrell Issa, the committee wants Geithner to answer questions about the New York Federal Reserve Bank's decision to allow the insurer to pay off credit default swaps held by banks in full for about $62.1 billion.

The committee will ask whether details of the payments were withheld from the public. Geithner headed the New York Fed during the bailout.

At the same time, Rep. Barney Frank, the powerful chairman of the House Financial Services Committee, said he would reopen the AIG bank payments issue.

We now have the time to put this back on the agenda. It is one of the subjects that the committee will be looking at, the Massachusetts Democrat said in a public response to requests for a hearing by Rep. Spencer Bachus, the Finance Committee's ranking Republican.

It was not immediately clear whether Frank would schedule his own hearing on the AIG payments. He added that Geithner's role in the AIG bailout was overshadowed by the two men that outranked him, Fed Chairman Ben Bernanke and then-U.S. Treasury Secretary Henry Paulson.

Issa said it was important for Geithner to answer such questions as lawmakers consider the Obama administration's regulatory reform proposals to give the Fed more power and authority over systemically important financial institutions.

This is and never has been about Tim Geithner, Issa said in a statement. It just so happens that he was at the helm at the time and naturally questions are being asked about what he knew or didn't know and we look forward to getting those answers.

A Treasury spokesman could not immediately be reached for comment.

EQUAL ACCESS REQUESTED

News of Geithner's decision to testify came as lawmakers urged the Fed to grant them the same access as members of the Senate Banking Committee to documents detailing the government's rescue of AIG.

Bachus and 24 other lawmakers said in a letter to Bernanke that allegations by some U.S. lawmakers that the Fed sought to suppress information about counterparty payments are deeply troubling.

The government rescued the failing insurer in September 2008 at a cost to taxpayers that has risen to $180 billion.

Subsequent revelations the Fed paid some of AIG's counterparties in full for contracts have raised concern. So has the release of emails showing the New York Fed had discussions with AIG officials about how much information should be disclosed publicly.

Issa, who released the emails, has said they show the New York Fed deliberately pressured AIG to suppress politically sensitive information.

Members of the Senate Banking Committee have been allowed to view documents relating to AIG at the Fed. Committee Chairman Christopher Dodd, a Democrat, broadened access to include all lawmakers on the panel after Republican Senator Jim Bunning complained at a hearing that only the chairman and the top Republican on the committee and their staffs were allowed to see the information.

(Additional reporting by Mark Felsenthal; Editing by Andrew Hay)