Geithner, NY Fed defend actions on AIG payments

Geithner, in prepared testimony for a much-anticipated congressional hearing on Wednesday, said protracted demands for concessions from banks in late 2008 could have triggered devastating credit rating downgrades and brought AIG down, with “catastrophic” consequences for the U.S. economy.

Geithner’s testimony is widely seen as important for his future as Treasury chief. He has denied acting in the interests of specific institutions.

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“I had no role in making decisions regarding what to disclose about the specific financial terms of Maiden Lane II and Maiden Lane III and payments to AIG counterparties,” Geithner said, referring to Fed investment vehicles that bought securities from the banks. The remarks were made available late on Tuesday.

Geithner, who ran the New York Fed at the time of the bailout, faces a grilling by the House of Representatives Oversight and Government Reform Committee, which is reexamining AIG’s payment of $62.1 billion to bank counterparties to close out trades made before and after the insurer was rescued.

Republican lawmakers on the panel have accused the New York Fed under Geithner of wasting billions of taxpayer dollars by failing to negotiate concessions from the banks and then trying to suppress public disclosures about the payments.

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