Fed defends actions in AIG case, invites inquiry (Reuters) - January 19. 2010
Federal Reserve officials on Tuesday launched a vigorous defense of their dealings with American International Group, calling for a Congressional audit and denying any inappropriate action with respect to payments the bailed-out insurer made to banks. Fed Chairman Ben Bernanke invited a full Congressional [GAO] audit of the U.S. central bank’s dealings with AIG and the New York Fed turned over 250,000 pages of documents to a House committee that has scheduled a hearing on the matter next week.

The U.S. House of Representatives Oversight and Government Reform Committee is investigating whether the New York Fed improperly limited public disclosures about payments to banks to unwind $62.1 billion in AIG credit default swaps. In a lengthy memo posted on its website, the New York Fed contested a number of basic points that had been reported earlier after a batch of emails was released by a lawmaker that appeared to show the New York Fed counseled AIG not to reveal it was paying banks 100 cents on the dollar on credit default swaps it had written.

Bernanke: Go All Out in AIG Inquiry By Eric Rosenbaum, The Street - 01/19/10
WASHINGTON D.C. (TheStreet) — U.S. Federal Reserve chairman Ben Bernanke on Tuesday said that the federal government should proceed full-throttle with its inquiry into the communications between the Federal Reserve and AIG. In a letter written to Acting Comptroller General Gene Dodaro of the Government Accountability Office (GAO), Bernanke wrote, “To afford the public the most complete possible understanding of our decisions and actions in this matter, and to provide a comprehensive response to questions that have been raised by members of Congress, the Federal Reserve would welcome a full review by GAO of all aspects of our involvement in the extension of credit to AIG.”

Bernanke also reiterated in the letter to the GAO chief how dire the threat to the U.S. and global economy would have been if AIG was not rescued by the federal government. Bernanke was not averse to using the letter as a spin opportunity for the administration. In addition to offering full cooperation of the Fed, Bernanke noted that the cooperation will help the U.S. public to understand how the federal government made the right decision in the bailout of AIG.