Monday, January 25, 2010

Very Suspicious Behavior from the Fed Regarding AIG Transactions

Bloomberg reports the lengths to which the Fed has gone to try to keep the details of Maiden Lane III, the entity created to buy drecky CDOs from AIG counterparties who received 100% credit default swap payouts.

Get a load of this, the Fed was arguing that info IN THE PUBLIC DOMAIN should be treated as confidential! The Ministry of Truth in action:

After media reports that month named some of AIG’s counterparties, AIG executives wrote a draft of a letter to the SEC saying that it intended to withdraw its January request for confidential treatment. Later that March, the New York Fed sent edited versions of another request for confidentiality and provided arguments to help AIG make the case. The SEC granted confidential treatment in May of 2009.

This whole affair puts the Fed in a bad light indeed. The article details how the AIG, pushed by the Fed, made four efforts with the SEC to get information regarding the AIG payouts and Maiden Lane III purchases redacted. AIG seems reluctant, and the SEC, to its credit, did not roll over (although one can argue it in the end conceded too much ground).

And the arguments made by the Fed are rubbish:

On March 5, 2009, Fed Vice Chairman Donald Kohn testified before Congress that disclosure of the counterparties’ names would harm the insurer’s ability to do business. That month, AIG executives told regulators they had no objection to disclosing counterparty names

Yves here. So let’s be clear, the Fed lied to Congress. If there was the potential for this disclosure to damage AIG, they’d be the first to be keen for any excuse to preserve confidentiality.

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