NEW YORK (CNNMoney.com) -- Treasury Secretary Timothy Geithner is set to tell lawmakers Wednesday that he had no involvement in an apparent attempt by government regulators to withhold crucial information about AIG's bailout from the public.
AIG and the Federal Reserve Bank of New York have become targets of multiple federal investigations into whether the overseer instructed AIG (AIG, Fortune 500) not to disclose more than a dozen controversial counterparty transactions to the Securities and Exchange Commission.
"I had no role in making decisions regarding what to disclose about the specific financial terms of Maiden Lane II and Maiden Lane III (the companies established by the New York Fed to buy AIG's troubled assets), and payments to AIGs counterparties," Geithner will say, according to a copy of prepared testimony.
The New York Fed, one of the primary overseers of AIG's $181 billion bailout, was headed by Geithner when the counterparty transactions in question were made.
The House Oversight Committee is holding a hearing on the matter at 10 a.m. ET. Geithner, former Treasury Secretary Henry Paulson, Special Inspector General for the $700 billion bailout Neil Barofsky and the lead attorneys for the New York Fed and AIG are all slated to testify at the hearing.
AIG's bailout has incited furor among lawmakers and the public, as the troubled insurer has come to symbolize the corporate greed, risky behavior and lack of regulation that many believe caused the Great Recession.
One of the most contentious issues related to the bailout was a decision by the New York Fed to pay counterparties 100 cents on the dollar for the underlying assets that AIG has insured through so-called credit default swap agreements. As a result, $62.1 billion of taxpayer and AIG funds were essentially funneled to 16 banks that were counterparties to AIG insurance contracts.
In November, SigTARP Barofsky released an audit of the New York Fed's decision that found the regulator failed to use its clout to negotiate concessions from AIG's business partners.
The House Oversight Committee, chaired by Rep. Edolphus Towns, D-N.Y., subpoenaed the New York Fed for the documents Barofsky used in his audit and recently received 250,000 pages of e-mails and other correspondence. The documents reveal that the New York Fed had urged AIG not to make any reference in its SEC filing that the counterparties had received the dollar-for-dollar value.
According to his prepared testimony, Geithner is set to acknowledge that he was involved in the decision to offer full-value for the underlying assets on the credit default swaps, and he will defend the decision to do so. But regarding any decision not to disclose those transactions, Geithner will argue that he had recused himself from the day-to-day operations of the New York Fed before those decisions were made.
"On Nov. 24, President-elect Barack Obama announced that he intended to nominate me to be Secretary of the Treasury," Geithner will say. "Starting on Nov. 24, I withdrew from involvement in monetary policy decision, policies involving individual institutions, and day-to-day management of FRBNY."
One day later, on Nov. 25, the subpoenaed New York Fed documents show that AIG began to prepare its report with the SEC. To top of page
