The New York Federal Reserve Bank actively supported American International Group's regulatory requests for confidentiality on its bank counterparties but did not pressure the insurer for secrecy, according to the top lawyer of the New York Fed.

The New York Fed has been under fire over whether it limited public disclosures about payments to banks by AIG, which received about $180 billion in a government bailout, to unwind $62.1 billion in credit default swaps.

Thomas Baxter, the New York Fed's general counsel, in a copy of prepared congressional testimony obtained by Reuters on Tuesday, defended AIG's requests for confidentiality of credit default swap counterparties and details of individual securities with the Securities and Exchange Commission.

Some have suggested that in November 2008, AIG had planned to disclose the identities of the CDS counterparties and that the New York Fed pressured or compelled AIG not to, Baxter said in the prepared remarks. This is not true.

Baxter is to testify on Wednesday at a U.S. House of Representatives Oversight and Government Reform Committee hearing focusing on the AIG payments to banks and the circumstances surrounding their disclosure.

U.S. Rep. Darrell Issa, the committee's top Republican who has spearheaded an investigation into AIG's payments to banks, has accused the New York Fed of orchestrating a coverup of the payments to avoid public scrutiny. Timothy Geithner, the current Treasury secretary, at that time was the head of the New York Fed.

Baxter said the New York Fed's only interest in the confidentiality requests, particularly for details of individual securities, was preserving the value of taxpayer investments in AIG and in securities purchased by a Fed investment vehicle, Maiden Lane III.

To be sure, the New York Fed actively supported the idea of keeping this information confidential, but once again, only to maximize the value of the Maiden Lane III portfolio for the benefit of the taxpayer, Baxter said in the testimony.

He also defended the New York Fed's decision to pay par value for the securities underlying the credit default swaps, despite criticism that it did not try hard enough to wring concessions from banks, which included Societe Generale Goldman Sachs and Deutsche Bank .

The New York Fed had little or no bargaining power because of the government's previous bailout of AIG, he said. It faced catastrophic consequences for the U.S. economy if it failed to reach a deal to retire the credit default swaps by Nov. 10, 2008, when credit downgrades would have drained AIG of cash and put the insurer on a downward spiral.

In our judgment, taking additional time to press further for a discount was not justified in light of the overwhelming risk and catastrophic consequences of failing to complete the transaction by November 10, Baxter said.

Wednesday's hearing also will feature testimony from Geithner and his predecessor at the Treasury, Henry Paulson, who played a significant role in the AIG bailout.

(Reporting by David Lawder; Editing by Leslie Adler)