The New York Federal Reserve Bank actively worked with bailed out insurer AIG to build a case against disclosing details of AIG's payments to banks just days after the insurer considered making them public, documents released late on Saturday showed.

Lawyers for the Fed bank, which had taken over a pool of AIG assets as part of a $180 billion government bailout of the insurer in 2008, advised that AIG maintain a confidential treatment request from the Securities and Exchange Commission, according to emails provided by Rep. Darrell Issa, a U.S. lawmaker probing the matter.

A separate batch of emails made public earlier this month showed that New York Fed had advised AIG not to disclose the payments in a securities filing in late 2008.

The email traffic has raised questions about the role of Treasury Secretary Timothy Geithner, who ran the New York Fed at the time of the AIG bailout and the insurer's payment of some $62.1 billion to banks to liquidate credit default swaps it had sold to them.

Geithner is among those due to testify on the AIG payments and efforts to limit public disclosures about them at a January 27 hearing of theHouse of Representatives Oversight and Government Reform Committee. Former Treasury Secretary Henry Paulson also has been asked to appear before the panel.

Geithner has said Fed officials had no choice but to allow AIG to pay the banks in full, but has denied any involvement in discussions to suppress disclosures. He recused himself from matters involving AIG after being nominated for Treasury Secretary in November 2008.

CONFIDENTIALITY WITHDRAWAL LETTER

The latest emails show a proposed letter to the SEC requesting the withdrawal of the confidential treatment request around March 10, 2009, after some information on payments was reported by media, but the letter was never sent to the SEC.

Instead of withdrawing the confidentiality request, the emails show further exchanges between New York Fed and AIG lawyers, that led to the insurer days later submitting a new confidentiality request. A draft of the request shows AIG asked the SEC to keep secret details about specific securities, their notional values, collateral posted against them and mark-downs in their market values.

AIG argued in the request that the assets held in a New York Fed investment vehicle called Maiden Lane III that was managed by BlackRock Inc could lose value if the information was disclosed.

If market participants acquired information as to the composition of ML III's securities portfolio or if the prices paid by ML III were known to market participants, BlackRock's efforts to effectively manage ML III's portfolio of securities would be seriously undermined, AIG said in the confidentiality request.

By this time, AIG had already been under some pressure by the SEC to disclose the counterparty payments, and on March 15, the company disclosed gross sums paid to individual banks, including posted collateral and direct payments totaling $62.1 billion, for 100 cents on the dollar -- a disclosure that stoked public rage about the AIG bailout.

Societe Generale received $16.5 billion, Goldman Sachs received $14 billion and Deutsche Bank received $8.5 billion in what has been labeled a backdoor bailout for top banks.

Issa, a California Republican, said the latest emails show that the Fed had a much more direct role than previously thought in determining what to disclose and what to keep confidential regarding the payments.

The underlying question that must be answered is why all the secrecy? Issa said in a statement. The ultimate goal of this investigation is to get the complete picture of who played what role in crafting the counterparty deal and keeping it out of public light in an effort to delay inevitable scrutiny.

The New York Fed has said its focus in AIG disclosures has been ensuring accuracy and protecting taxpayers interests during a time of severe economic distress.

PAULSON, FRIEDMAN TESTIMONY SOUGHT

Issa is the top Republican on the House Oversight and Government Reform Committee, whose chairman, Democrat Edolphus Towns, has asked former Treasury Secretary Henry Paulson to testify on January 27.

Towns, from New York, also has invited Stephen Friedman, the former board chairman of the New York Fed who now sits on Goldman Sachs' board of directors, was also added to the list of invited witnesses.

Spokesmen for Paulson and Friedman were not immediately available for comment on Saturday.

Along with Geithner, Neil Barofsky, special inspector general for the Troubled Asset Relief Program; Elias Habayeb, former chief financial officer of AIG Financial Services Group; and Thomas Baxter, general counsel for the New York Fed, have been confirmed to testify.

(Additional reporting by Jasmin Melvin)

Investment Goldman sachs Timothy geithner Aig