Via Daniel Indiviglio at The Atlantic, a report by Bloomberg turns up some grisly facts about Treasury Secretary Tim Geithner's tenure at his former employer, the New York Fed—namely, how the New York Fed told AIG to keep mum about its swaps deals with other banks that would benefit if AIG got bailed out.
According to emails obtained by Rep. Darrell Issa (R-Calif.), the New York Fed cut from a draft of an AIG regulatory filing mention that banks like Goldman Sachs and Societe Generale had swaps agreements with AIG and would benefit from AIG's rescue via a "backdoor bailout"—a troubling omission at a time when AIG's fate was up in the air and full disclosure was critical. Bloomberg quotes Issa as saying, "It appears that the New York Fed deliberately pressured AIG to restrict and delay the disclosure of important information." Taxpayers, he added, "deserve full and complete disclosure under our nation's securities laws, not the withholding of politically inconvenient information."
Indiviglio uses the latest revelation in the AIG counterparty saga to not only insist that the overly opaque Fed doesn't deserve any more authority (as I did yesterday), but to even question Geithner's position as Treasury Secretary. Without a doubt, that Geithner's New York Fed tried to cover up AIG's exposure is embarassing at the very least; it's also more broadly indicative of the Fed's belief that it can get away with almost anything behind closed doors. Is that the kind of regulator, as some have proposed, that should be tasked with overseeing financial institutions and markets?