WASHINGTON — A House of Representatives committee chairman has invited Treasury Secretary Timothy Geithner to testify why, immediately after he was nominated, federal regulators decided not to reveal the generous terms of $62 billion in taxpayer-financed payouts to major banks.
The White House, responding to the release of internal e-mails drawing Geithner into yet another controversy over the government's handling of the nation's financial crisis, reiterated President Barack Obama's support for his treasury secretary. Asked whether Geithner still has Obama's full confidence, presidential Press Secretary Robert Gibbs said, "Of course."
The e-mails show that the Federal Reserve Bank of New York, which Geithner headed from 2003 to 2008, directed the giant insurer American International Group for months to keep secret the terms of the payments to Goldman Sachs and other U.S. and European banks.
McClatchy reported Thursday that lawyers for the New York Fed began to press AIG attorneys to maintain secrecy about the payouts on Nov. 24, 2008, hours after Geithner was nominated for his Cabinet post. AIG lawyers voiced their disagreement on several occasions over the ensuing months until the details of the payouts were made public last March.
As a result of the delays, Geithner never had to face questions at his Senate confirmation hearings last January about the New York Fed's decision to pay the banks the full face value of insurance-like bets called credit-default swaps.
Gibbs said that Geithner, who formally withdrew from such matters upon his nomination, wasn't party to the e-mails or "to the decision that was being made."
Democratic Rep. Edolphus Towns of New York, the chairman of the House Oversight and Government Reform Committee, said he'd hold a hearing the week of Jan. 18 to examine how $182 billion in taxpayers' dollars that rescued AIG was used.
Towns has invited Geithner and Thomas Baxter, the general counsel of the New York Fed, to testify, the committee said.
Asked whether Geithner would oblige, a Treasury Department spokeswoman declined to comment.
Towns said in a statement that in the aftermath of the bailout of AIG, "the American people continue to question where their tax dollars were really sent when the government rescued this company."
He said he thought that a "comprehensive review of the rise and fall of AIG," including its issuance of some $80 billion in mortgage-related protection to large banks, could help explain "how inadequate regulations, cheap money, risky business deals and, in some instances, corruption led to the current economic crisis."
The swap contracts enabled the banks to take far greater risks than regulators usually permit, allowing them to plunge hundreds of billions of dollars into ill-fated investments in risky mortgages to marginal borrowers.
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