Washington denies Geithner had role in alleged AIG cover-up

THE WHITE House yesterday denied US treasury secretary Timothy Geithner was involved in an alleged cover-up at insurance giant American International Group (AIG) and said he still had President Barack Obama’s full confidence.

White House spokesman Robert Gibbs told a briefing that e-mails at the centre of claims there had been a cover-up at AIG, which received a huge government bailout during the financial crisis last year, never rose to Mr Geithner’s level.

The e-mails, released late last night, showed that, in late 2008 during Mr Geithner’s tenure, the New York Federal Reserve Bank urged AIG to limit disclosures about its payments to banks after getting a $180 billion (€125 billion) government bailout.

The exchanges, between the New York Fed and AIG lawyers, showed that AIG initially proposed disclosing to the US Securities and Exchange Commission (SEC) in early December 2008 that it would pay counterparties 100 cents on the dollar to liquidate credit default swaps it sold them. But the decision to pay Goldman Sachs, Société Générale and other global banking giants in full with taxpayer funds was not disclosed by AIG until March 2009, when it announced a $93 billion payoff that stoked public rage over the bailout.

Adding fuel to the fire, Mr Geithner, who by then had become the US treasury secretary, was forced to allow AIG to pay $165 million in bonuses to top executives of the division that nearly caused its collapse.

Representative Darrell Issa, a California Republican who requested the e-mails from AIG and made them public, said they show the New York Fed tried to suppress politically sensitive information about the bailout.

Mr Geithner, who has faced criticism for his handling of the AIG bailout throughout his first year in office, was nominated for treasury secretary on November 24th, 2008, by then president-elect Barack Obama, the day much of the e-mail traffic started.

Republican representative Roy Blunt of Missouri said the e-mails meant Mr Geithner “has some explaining to do”.

Treasury spokeswoman Meg Reilly said that, on the day he was nominated, Mr Geithner was “officially recused” from dealing with matters relating to specific companies, including AIG, because of his nomination. “Secretary Geithner played no role in these decisions,” Ms Reilly said. – (Reuters)