Two members of the House are supporting a sweeping Government Accountability Office study of the Federal Reserve Board's role in American International Group's decision to make whole its bank trading partners.
Rep. Edolphus Towns, D-N.Y., and Rep. Elijah Cummings, D-Md., said in a statement they had asked the GAO to launch a broad investigation into the Federal financial assistance provided to AIG, New York.
Towns is the chairman of the House Oversight and Government Reform Committee, and Cummings is a senior member. Cummings also led congressional efforts to force AIG to disclose the bonuses it was paying to the staff of its financial products unit.
This unit oversaw AIG's investments in credit default swaps and other speculative instruments that played a major role in its need for a federal bailout in September 2008.
Cummings's efforts to force disclosure of the bonus payments also led to a congressional investigation into the issue of high bonuses paid to their executives by banks that were receiving billions of dollars in federal assistance at the time. That prompted legislation that mandates federal oversight of institutions receiving federal aid.
Towns and. Cummings made their request for a study in a letter to the GAO Acting Comptroller General Gene Dodaro.
"We believe that such a review would be an important complement to investigations conducted by the House Oversight and Government Reform Committee and the Special Inspector General for the Troubled Assets Relief Program," Towns and Cummings said in the letter.
The letter requested that GAO review all aspects of Federal assistance provided to AIG from 2007 to the present by the Federal Reserve, U.S. Treasury Department or any other government entity.
Towns and Cummings also asked that the review include an examination of payments by AIG to counterparties of credit default swap contracts, including who made the decision to pay the counterparties in full and what steps were taken to prevent a full public disclosure of the counterparty payments.
In addition, they requested details of the decision not to allow AIG to file for bankruptcy and the lessons learned from AIG's rescue.
The letter follows a request by Ben Bernanke, chairman of the Fed, for a GAO study of its involvement in AIG. The Federal Reserve Board of New York also supported the study.
The Fed Bank in New York has assumed responsibility for managing the Fed's investment of what at one point totaled $182 billion in cash to AIG in return for 79.9% of its stock.
A hearing on the issue will take place Wednesday before the oversight panel.
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