In response to documents obtained because of a House Oversight and Government Reform committee investigation into the New York Federal Reserve’s handling of bailout money for AIG, Neil Barofsky, special investigator general overseeing the Troubled Assets Relief Program, has opened two new investigations into the shady deals, and will likely discuss their nature during his testimony in front of the committee tomorrow.
First, Barofsky will be investigating whether the New York Federal Reserve illicitly withheld information about the AIG bailout. Emails recently showed AIG trying to hush up details of the $27.1 billion in payments to their counterparties, a move known as the “backdoor bailout.”
Secondly, Barofsky will also be investigating the “extent of the Federal Reserve’s cooperation” during an audit of the bailout system.
The House investigation was sparked by documents that showed that AIG fully paid for credit default swap contracts to banks after their $150 billion bailout, instead of attempting to negotiate a lower rate, and attempted to keep the full payment of the contracts off SEC filings.
Treasury Secretary Timothy Geithner, who was president of the New York Federal Reserve during the bailout of AIG, has been caught up in the investigation. Spokespeople for the Treasury and the New York Fed both claim Geithner was not involved, but he will be required to testify before the committee tomorrow.
“If anyone at the Fed thought that this investigation will stop after Wednesday’s hearing – they are completely mistaken,” Ranking Republican Darrell Issa (R-CA) said to Politico. “There has been a widespread effort by officials at the NY Fed to thwart transparency and we will continue to pursue this investigation for as long as it takes to get the truth.”