Darrell Issa Accuses FRBNY Of Contempt For Selective Document Disclosure

Tyler Durden's picture

Rep. Darrell Issa comes out guns blazing once again, alleging that the Fed provided a selective response to the subpoena to provide all documents relating to the AIG bailout, and asks Edolphus Towns, Chairman of the House Committee on Oversight and Government Reform, to hold Fed officials responsible for this act, in contempt.

First, the FRBNY's production does not include documents related to the FRBNY's knowledge of AIG's credit default swap counterparty exposure before AIG was bailed out in September 2008. The Committee needs to understand AIG's counterparty exposure and the FRBNY's knowledge of the potential problems at AIG before federal officials thought it became necessary to spend billions of taxpayer dollars to bail out the company.

Second, the FRBNY's production does not include documents related to the counterparty payments after May of 2009, including but not limited to the FRBNY's response to Congressional and press inquiries, such as this Committee's investigation. As you know, has stonewalled this Committee's investigation at every turn since I initially requested information from FRBNY in October of 2009. It is crucial that this Committee understand the full extend of FRBNY's efforts to cover up the counterparty payments and to prevent and delay other efforts to bring details about these transactions to the public.

Dear Congressman Issa, while we are on this topic, and since you are requesting additional information from the FRBNY, we were hoping to provide some suggestions on incremental disclosure which should be critical in your ongoing investigation, and that should be opened up to the public's interest immediately.

As you will recall, AIG was bailed out not once, but twice. As Zero Hedge disclosed at the time, in late February, at about the time the market was probing decade lows, and ahead of AIG's announcement of a record $60 billion loss, CNBC's David Faber announced that AIG had retained bankruptcy law firm Weil Gotshal to advise it on its imminent bankruptcy.

Furthermore, subsequent to a Fox Business FOIA of the FRBNY (one of the few that did not end up in the trash, unlike the one sent out by Zero Hedge staffers), it became known that in late January the NY Fed was being advised by Davis Polk as legal counsel, and by Morgan Stanley as financial advisor, on the decision of whether or not to file AIG, as can be gleaned from one of the few unredacted emails below:

As Zero Hedge wrote in June:

A few days ago, Fox Business published
emails it has received as part of a FOIA request to the Federal
Reserve. What the email (below) indicates is that not only was an AIG
bankruptcy a viable option for the Fed, but that [Davis Polk lawyer] Marshall Huebner was
in fact presenting to an extensive audience of Fed members on the
merits (or lack thereof) of such.

This coincides perfectly with unconfirmed rumors swirling in late
January that AIG had retained TBTF law firm Weil Gotshal to advise it
in advance of a bankruptcy filing. Instead, the Fed, for some reason,
flipped and decided not only not to file AIG, but to throw several tens
of billions of extra dollars at it, which led to the March Barney Frank
AIG witch hunts (which by the way have still to lead to even one public
questioning of Joe Cassano).

is the issue - as the Fed has lately been spinning its transparency
with and without the use of recently retained lobbyists, it is critical
that all the documentation that was presented at this meeting, and all
tangential materials, be made public immediately. And this means not
merely Huebner's presentations that had been put together as part of
the above meeting (which as the e-mail indicates did take place, and
there is undoubtedly information that the Davis Polk lawyer presented),
but any discussion materials, memoranda and e-mails, between the Fed
and all its legal and financial advisors: in this case, most notably,
one Morgan Stanley, which was
the financial advisor in the AIG situation. And just so readers recall
the incest that is going on between the Fed and its financial advisors,
here are some of the firms engaged by the Fed in its ongoing efforts to
vacuum any and every available security out there: in the Fed's $500
billion MBS program, retained financial companies are BlackRock
Inc., Pimco, Wellington Management Co. and... Goldman Sachs. In another
program, it is JP Morgan which is overseeing $540 billion in
disbursements to money market mutual funds... and then there are the
TALF advisors... and the list goes on and on.

Absent knowledge of the decision-making process of the second AIG bailout, and without an understanding of the recommendations that Morgan Stanley provided to the NY Fed and AIG, it would be impossible to generate a complete picture of all the forces that determined the fate of AIG, which survived not one but two near-death experiences. Of course, had the FRBNY responded to our FOIA request, after their initial notification that they needed an extended period of time to gather all the required information, all this information would have been public already a long time ago.

Which is why we suggest you request the following additional disclosure:

  1. All documentation, reports, presentations, phone records, voice mails, facsimiles and all other relevant information between AIG, the Federal Reserve and Weil Gotshal, alleged bankruptcy counsel to AIG
  2. All documentation, reports, presentations, phone records, voice
    mails, facsimiles and all other relevant information between AIG, the
    Federal Reserve and Davis Polk, legal advisor to NY Fed
  3. All documentation, reports, presentations, phone records, voice
    mails, facsimiles and all other relevant information between AIG, the
    Federal Reserve and Morgan Stanley, financial advisor to NY Fed
  4. All documentation, reports, presentations, phone records, voice
    mails, facsimiles and all other relevant information between AIG, the
    Federal Reserve and Simpson Thacher, legal advisor to AIG Board
  5. All documentation, reports, presentations, phone records, voice
    mails, facsimiles and all other relevant information between AIG, the
    Federal Reserve and Sullivan & Cromwell, legal advisor to AIG

Only after all this information has been compiled and disclosed can you and your committee hope to make an informed decision on all the conflicts of interest inherent in the decision leading to the AIG bail out and that of its counterparties.


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strike for return to reality's picture

Tyler, if you think Treserve is refusing to come clean on this, why do you think the TIC report is legitimate?

Cursive's picture

I think there is the very high likelihood that somebody is just entering numbers in a spreadhsheet and that there is no basis for these numbers.

Anonymous's picture

A government that would make up reports about WMD to justify starting a war in Iraq would have no problems fudging a spreadsheet to make it looks like somebody, other than Treserve, is buying their debt.

deadhead's picture

Great follow up ZH.

I'm confident that Mr. Issa's staff is monitoring this post and please know that many of us throughout the USA appreciate Mr. Issa's efforts in this matter.

Just in case, is there anybody on ZH who is a constituent of Mr. Issa that can forward this to him?

Thank you.


Mr Lennon Hendrix's picture

TouchDown warrior.  Scalps!

Wrapping two TARPs around AIG was so obviously excessive and fraudulent that even Bernie's mama would have boxed some ears. 

It has amazed me that this story took so long to materialize in House. 

Finally I feel the tide turning.



Anonymous's picture

go darrel go.....i doubt that congress has the political or moral will to make the fed comply but at least someone is making the right noises....i strongly believe that the bought and paid for whores of congress will prevail but who knows....

Kayman's picture

We have to keep in mind that slaying this Fed monster, will death from a thousand cuts.

Any politician that wishes to stay employed had better read the Massachussetts Massacre as kicking out the incumbent, not voting Republican.

Whether it is George Obama or Barack O'bush, these traitors to the American people had better cut off their (soon to be former) benefactors in Wall Street.  

This sleaze must end and will end.  And that will be change I can believe in.

monopoly's picture

Tyler, Well done. Ya know, most people are free between midnight and 5 AM. but I know you are already booked every night for those hours. How does he do that?? Kudos to you and the entire staff sir.

Fritz's picture

Kudos on this.

Once again, ZH is not only on top of the story.....they are on top of the follow-up on the story.

Thank you

waterdog's picture

I think that any prudent person who has followed AIG and the Fed the past 15 months realizes that there is confusing as to did or did not a criminal act occurred during the bailout of AIG.

Most of us can remember the stonewalling that took place during the Nixon break-in hearings that Dirkson's committee was having a great deal of difficulty getting information so that it could determine if a crime had occurred related to the cover-up. It already knew a crime called burglary had occurred.

Then John Dean, the organizer of the break-in, delivered Nixon to the wolves when he disclosed the tapes

The Fed has now gone from a simple break-in, the AIG bailout, to a full blown cover-up of the bailout; the real crime.

Bernanke is over his head. He is confused about the legality of full disclosure because he has set the pattern of cover-up by claiming a court untested privilege.

Bernake knows that in the very near future a John Dean is going to appear. Just as John Dean saved the oligarchy by disclosing Nixon attempted a cover-up by providing knowledge of tapes to Dirkson, this John Dean is going to save the oligarchy by providing information that Geithner, Paulson and Bernanke covered up the saving of Goldman Sacks.

Just as the inquiries ended when Nixon went down in flames, so will the inquiries about the bailout of AIG when Geithner and Bernanke go down in flames.

The oligarchy will remain intact and unscathed.

Jefferson's picture

Geitner and Bernanke will fall on their swords in order to make way for the globalist "reformers" including Volcker, Stiglitz, et. al. Volcker was kept on ice in anticipation of this moment.

Obama meeting with Volcker tomorrow morning prior to Obama outlining his new financial regulatory regime is a clear signal the next wave of the GFC will soon commence.

Eventually the vision of Volcker and his cohorts at the G30 of a single global currency administered by a global central bank with total control over the international monetary regime will be realized.

Anonymous's picture

I would give Geithner and Bernanke immunity if it meant getting Paulson behind bars. That turd was the "muscle" behind all wrongs that occured last year with respect to the bailouts.

theadr's picture

True dat.  Beside Cheney, Hank Paulson was the biggest criminal of the gang.

Burnbright's picture

Not to defend Cheney, but I think he was just a paranoid lunatic (maybe a sociopath), Hank on the other hand is a greedy lunatic.

Miles Kendig's picture

Cheney was probably one of the top 5 executive branch operators of the past 75 years....

Ned Zeppelin's picture

Abso-fucking-lutely! Said it at the time.  Gotta wonder what's in those Kashkari-edited memoirs of his.  He is a traitor wrapped in Old Glory. 

SDRII's picture

The interesting bit of news to come out of the betsy quicky interview with Buffet was his insistence that he'd be a seller of equity if Bernanke didn't get re-appointed. It is interesting how Buffet has shown up at every critical point in the pump campaign, beginning with his advisory role and moving to the WFC dividend raise into the short ban followed by the NYT editorial and the GS investment. Yet another curious timeline.

pros's picture


Of course Buffet would sell...

he'd be losing one of his best sources of insider information

Buffet should have gone to jail 30 years ago



Jefferson's picture

What is even more interesting is that Buffet bet the entire Berkshire franchise by making it a counterparty to a set of massive stock index put options. Then doubled down in May. The $35 billion question is who gets to feed on Berkshire's entrails in the event Berkshire has to make good on that bet. That fact has never been disclosed. I sure would want to know who was on the other side of that trade if I was a Berkshire shareholder.

Careless Whisper's picture

While you're at, Congressman Issa, I suggest you slap everyone within a 50 mile radius of GoldmanSachs and Credit Suisse with a subpoena.

TarpMe's picture

Butterfield was the guy who revealed the existence of the watergate tapes, but I agree with the point being made that someone will do the right thing here. The pressures are getting greater. And its all because of this Issa guy -I love this guy!!

Anonymous's picture

no one was doing the right thing in watergate...it was
a cia operation to remove nixon without having to
assinate him as it had just done with kennedy.

Yossarian's picture

Kind of off topic but does anyone know what Lehman creditors ended up getting (or are expected to get if it has yet to be decided)?  From what I could gather it seems that assets about equaled liabilities at the time of bankruptcy but creditors ended up getting $.09 on the $1- is this correct?  I'm assuming those are the most junior creditors but still...

carbonmutant's picture

I think Tyler was a Pit Bull in a previous lifetime.

I look forward to Darrell's expanded request for disclosure.

Anonymous's picture

ZH your efforts are appreciated. I'll be on standby with my pitch fork.

pros's picture

The fact that Casano has disappeared without a trace is perhaps the best indication that this AIG/GS/FRBNY scandal could the biggest in US history-it brought down the banking system because it hid the counterparty risk from the market.


To Waterdog...

and I agree...there will be a John Dean....and a "Deep Throat", and a Martha Mitchell...etc etc.

these bonuses were hush money


and who hired GS Director Liddy to go into AIG as CEO and destroy the records?

Anonymous's picture

History Beckons:
Place: United States
Date: 1933
Players: Wallstreet, Congress, and unsung hero Smedley Butler
Action: Coup

1. http://www.youtube.com/watch?v=UXGUgFXoRu4
2. http://www.youtube.com/watch?v=UGPb6ulVEK0&NR=1
3. http://www.youtube.com/watch?v=Mav69K2zkgw&NR=1

hbjork1's picture

Priority question.  Where did Issa get his education?  I am sure it wasn't Harvard.

DaveyJones's picture

Issa was born in Cleveland, Ohio, the grandson of Lebanese immigrants. His net worth is approximately $251 million, making him the wealthiest member of Congress.[2][3] Issa enlisted in the Army during his senior year of high school, where he served as a bomb disposal technician.[citation needed]

He attended Kent State University Stark in North Canton, Ohio and Siena Heights College in Adrian, Michigan, on an ROTC scholarship, earning a bachelor's degree in business administration in 1976. Upon graduation, he was commissioned as a US Army Officer, serving as a tank platoon leader and a computer research and development specialist, among other command roles. He left the Regular Army in 1980 with the rank of captain. He later moved to Vista, California, a suburb of San Diego, where he now lives.

 During the 1970s, Issa and his brother were twice charged with auto theft, once for a Maserati sports car in 1972 and for a Mercedes Benz sedan in 1979. He has also been convicted for possession of an unregistered gun. [4]

Issa made his fortune through his company, Directed Electronics Incorporated, that is most famous for its flagship product, the "Viper" car alarm. It bears one notable siren that is a recording of Issa's voice, "please step away from the car."[5] As of 2004, Directed Electronics was North America's largest aftermarket automotive electronics manufacturer. Issa divested all personal interest in Directed Electronics after being elected to public office,[citation needed] but is the richest member of the House and the second richest in all of the 111th Congress.[6]


He's our congressional car alarm. Seems he also turned his knowledge of dark side into a force for good

Ned Zeppelin's picture

With that net worth, he's either a tool of the cabal, or has enough FU money to not care what they threaten him with.  For now, I'll assume the latter.  Be careful with assuming these guys are heros.

- Won't Get Fooled again

Miles Kendig's picture

Ned - Remember that Issa's district includes Orange county, the home of residential real estate funding of the 2000's like New Century and Quick Loan Funding.

pros's picture


the Fed's friends have been hard at work on Issa's Wiki page


full of questionable info..

Anonymous's picture

You have to admit, what a prime example of the so called ''New World Order'' counter intelligence play this is. The foundation of insurance and ''reinsurance'' timed with legislative action to ''house'' the entire global market to the point of a mark of debt placed upon labor, well, it's just amazing. When you throw in the media influence and the geopolitical grand chessboard placement of the most powerful military force and buildup now in the Middle East, you can surely see the red dress on the whore and the burdensome stone under the Dome of The Rock, thanks to Blackrock and G$ friends etc...
If you are old enough to recall the BCCI S&L Saddam to the dead and deposed Iranian King of pain, you know this Representative needs a side arm and military personnel not in uniform. This AIG thing is part of the same 911 operation and the whole damn thing is aided by the compartmentalized mental midgets that could not investigate the cause for the mortgage on their own Chinese Red House. Bunch of pathetic drunken fools inside a casino playing Russian Roulette with a gun that has no empty chamber. Game is over babies, this shit is so far in the wind there is not a thing to do but stand fast and observe the strong delusion commit suicide. The fact that innocent people are being slaughtered, bankrupted and imprisoned by all this shit does not even peak the passion of assholes still working for the proverbial man because, they are clueless compartmentalized dumb shits subject to ''orders'' and the daisy chain of command linked to corruption.

It's a pleasure to witness Zero Hedge actually able to articulate what's going on at such a technical level. Well done.

tom a taxpayer's picture

Thank you, Rep. Issa, for relentless pursuit of accountability and justice. You caught FRBNY trying to prevent Congressional investigation into the heart of the scandal: the 100% bailout of Goldman Sachs and AIG's other big domestic and foreign bank counterparties. Your reply hits the nail on the head: "First, the FRBNY's production does not include documents related to FRBNY's knowledge of AIG's credit default counterparty exposure before AIG was bailed out in September 2008."


Fed Chairman Ben Bernanke is trying to use the same stonewalling tactics with the GAO in his Jan 19, 2010 letter to GAO. If you examine his 2-page letter to GAO, Ben mentions only AIG and refers to review of Fed action regarding only AIG. Ben does not say a word about the heart of the scandal, the 100% bailout of Goldman Sachs and other big domestic and foreign banks. Ben is obviously trying to prevent GAO investigators from examining 1) how Ben and the Fed managed and directed the extension of credit to AIG to bailout Goldman Sachs and other big banks, 2) Ben and the Fed's direct and indirect communications with Goldman Sachs and other big domestic and foreign banks.


Both Ben and the FRBNY are trying to limit the Congressional and GAO investigations to AIG "the front man" for the taxpayer bust out operation, and are trying to hide the ringleaders at Goldman Sachs and other domestic and foreign bank counterparties. 




Also, thank you, Tyler Durden, for your relentless pursuit of accountability and justice. 

Miles Kendig's picture

tom a taxpayer - This may well provide the crack for the water to exploit.  Just as with so many other situations once the first domino falls most of the rest will follow.  I suspect that once this process creates the exploitable crack the process may well unwind far faster than many can fathom.  This is what has concerned so many folks.  I am interested to see what known unknowns develop from here.  BTW, thanks for posting.  Your insights have been superb over these past months and I have enjoyed them immensely.

deadhead's picture

Well said Tom and Miles!

The Massachusetts matter has forced Obama's hand in regards to the Fed, Wall Street, Banking matter.....problem is that the admin will not due the correct and prudent things needed to fix the banking system (discharge, delevering of debt, retention of all profits as needed capital, etc) but will engage in an enormous amount of negative jawboning, starting last nite with the prop desk matter and bringing out Volcker for show.

Obama blew it by delegating the financial crisis matter to bernanke, summers, etc.

He also blew it big time managing health care reform.

He really blew it big time by not focusing on what the american people demand: actions to address the economic and financial mess we are in.

Miles Kendig's picture

DH - An interesting read in the FT today.

A lot of Democrats – and some Republicans – believe Mr Obama is too beholden to the counsel of Lawrence Summers, his senior economic adviser, and Tim Geithner, on his approach to the banks. “If I were to give Obama one piece of advice it would be to be much more radical on financial sector reform,” said a senior Democrat.

More broadly there is a debate on whether Mr Obama should go populist or move to the centre. In spite of the clear result on Tuesday, the electorate is sending very mixed signals. Americans clearly feel a strong resentment against the economic royalists on Wall Street. But there is also a growing backlash against deficit spending and redistributive programmes.


Anonymous's picture


I still believe...

Things That Scare Me
Neko Case


Fluorescent lights engage
Blackbirds frying on a wire
Same birds that followed me to school When I was young
Were they trying to tell me something
Were they telling me to run

The hammer clicks in place
The world's gonna pay
Right down in the face of God and his saints
Claim your soul's not for sale
I'm a dying breed who still believes
Haunted by American dreams
Haunted by American dreams


Ned Zeppelin's picture

Tyler - thanks for this note and for pushing this issue.  Maybe the tide is turning, or is the truth too big to hide? Look for convulsions, but this is healthy, unfortunately.  Citizens need to keep up the pressure.  My senators are hearing from me weekly on all this, and I am sure I am now in the "not that guy again" bucket!

Anonymous's picture

I assume this post ws sent to Issa and the proper authorities. I urge readers to send it temselves to the investigating committee. You can do this on line.

Giovanni Zucchetti's picture

The ISSA investigation will result in nothing because there is nothing there. A great deal of this material, if not all of it, was read by SIGTARP when it did its audit of counterparty payments.