A House committee probing bailout deals has subpoenaed the Federal Reserve Bank of New York for correspondence from Treasury Secretary Timothy Geithner and other officials.
The House Oversight and Government Affairs Committee is examining New York Fed decisions that funneled billions of dollars to big banks including Goldman Sachs Group Inc. and Morgan Stanley.
Geithner was president of the New York Fed at the time. He approved decisions involving the money from the bailout of failed insurer American International Group Inc., according to an earlier watchdog audit.
On Wednesday, committee chairman Rep. Edolphus Towns, D-N.Y. formally invited Geithner to testify this month about his role in the AIG bailout and the decision not to disclose what banks benefited.
In a statement, Towns said he had subpoenaed the New York Fed for documents about the decision to pay off AIG’s business partners and keep their names secret.
The subpoena demands e-mails, phone logs and meeting notes from Geithner; Stephen Friedman, who succeeded him as New York Fed president; New York Fed general counsel Thomas Baxter; and Sarah Dahlgren, the New York Fed’s top manager on AIG.
The November audit said the bank payoffs might have cost taxpayers billions more than necessary because Geithner did not demand concessions from AIG’s business partners.
Towns has called for Baxter to testify with Geithner. It remains unclear whether either will appear.
Towns criticized the deals’ secrecy, saying in a statement that they protected Wall Street at taxpayer expense.
“When average people were losing their homes and their jobs, the Bush administration decided to use taxpayer dollars to give a backdoor bailout to the biggest players on Wall Street,” Towns said.
“We need to understand why and how taxpayer dollars were used to bailout the same people who helped cause the financial crisis in the first place.”
The subpoena also demands correspondence about the Fed’s decision not to name the banks that benefited from the deals. Federal Reserve officials refused to name the banks that benefited from AIG’s money. They said releasing the names would undermine market confidence and make it harder to recoup the money committed to AIG, which eventually totaled $182 billion.
When the Fed reversed course and released the details, the financial markets took it in stride, the November audit pointed out.
California Rep. Darrell Issa, the top Republican on the committee, asked Towns to subpoena the New York Fed after the Fed blocked a separate request for documents.
Administration officials have defended Geithner in the AIG matter by saying he wasn’t involved in the e-mails released last week. But the subpoena makes clear that the committee probe involves separate decisions Geithner made.
A Treasury spokesman did not respond to requests for comment. A New York Fed spokesman said in a statement that the bank “will work with the committee to provide relevant information as appropriate.”
Issa’s office had asked the bailout watchdog, Neil Barofsky, for documents he used to prepare the report on AIG’s payments to other banks. Barofsky has said the Fed “has directed us not to provide you with the documents that it has provided to us.”
That prompted Issa’s call for the subpoena.