A key lawmaker is seeking an investigation of reports that foreign American International Group Inc. counterparties have received preferential treatment.
Rep. Barney Frank, D-Mass., chairman of the House Financial Services Committee, calls for the investigation in a letter sent to Treasury Secretary Timothy Geithner and Federal Reserve Board Chairman Ben Bernanke.
Frank cites a letter from Rep. Spencer Bachus, R-Ala., the highest-ranking Republican on the Financial Services Committee.
Bachus writes in the letter to Frank that foreign institutions that were counterparties of AIG, New York, have been paid in full in connection with efforts to unwind transactions in late 2008, while U.S. banks that were AIG counterparties were asked, in some cases, to accept “reductions of over 70% of the total debt owed them.”
The reported “disparity in treatment between foreign banks and U.S. banks is troubling, particularly since the U.S. banks now being asked to take such reductions are some of the very taxpayers that have been funding AIG,” Bachus writes in his letter.
Frank acknowledges in his letter that his does not know what evidence Bachus has for the point he makes.
“But it is a serious issue and must be addressed,” Frank writes. “Clearly, any discrimination against American-owned financial institutions compared to the treatment being received by foreign owned institutions would be unacceptable to the Congress, and I believe to the American public.”
“AIG is making appropriate business decisions consistent with the fact that the company has limited resources and one over-riding priority: to repay taxpayers,” an AIG representative says in a response to the Frank and Bachus letters.