U.S. regulators should investigate whether laws were violated when the New York Federal Reserve Bank under Timothy Geithner urged insurer AIG to limit discussions about payments to banks, a Republican lawmaker said on Tuesday.

Republican Senator Jim Bunning of Kentucky, a member of the Senate Banking Committee, said an email exchange released on January 7 that showed the New York Fed advising American International Group Inc to withhold information about its derivatives counterparties from its Securities and Exchange Commission filings raised serious issues.

Because the information withheld appears to be material information about the financial condition of AIG and the value of the company, these actions may constitute a serious violation of the securities laws, Bunning said in a letter to SEC Chairman Mary Schapiro.

The SEC declined to comment.

Bunning said the regional Fed bank's actions are likely to have caused and continue to cause losses to private investors and undermine the credibility of the U.S. financial and securities markets.

The emails, which continue to stir controversy, showed that AIG initially proposed disclosing to the SEC in early December 2008 that it would pay counterparties 100 cents on the dollar to liquidate credit default swaps it sold them.

AIG received a $180 billion bailout from the government.

Its decision to pay Goldman Sachs Group Inc , Societe Generale AG and other global banking firms in full with taxpayer funds was not disclosed by AIG until March 2009, when it announced a $93 billion payoff that stoked public rage over the bailout.

The email exchange between lawyers for the New York Fed and AIG made public earlier this month implied that the regional Fed bank pressured AIG to limit disclosure about the payments.

Geithner, who had been president of the New York Fed, had become the Treasury secretary by March 2009 and he allowed AIG to pay $165 million in bonuses to top executives of the division that nearly caused its collapse.

The Obama administration and the New York Fed have said Geithner was unaware of any emailed advice by Fed lawyers to limit disclosures, but U.S. lawmakers are pressing for Geithner to testify at a hearing next week. Treasury has not yet said whether he will.

Bunning, a sharp-spoken critic of many Fed and Treasury policies, is the ranking Republican on the Securities, Insurance and Investment Subcommittee. He urged Schapiro to investigate actions taken by employees and agents of the Federal Reserve Bank of New York and government officials with respect to AIG.

(Reporting by Glenn Somerville; editing by Jeffrey Benkoe)