Darrell Issa's Letter To The NY Fed's Bill Dudley Demanding AIG Bailout Disclosure

Tyler Durden's picture

Following on previous posts by Janet Tavakoli and Dylan Ratigan, which both reference the need to uncover how and why it is that AIG counterparties received such generous taxpayer funded bailout terms, it is critical to present the letter penned by California Congressman Darrell Issa to New York Fed President Bill Dudley, demanding much more information on the Fed's decision regarding AIG. Issa's quote that "behind closed doors and with no approval from Congress, the FRBNY may have added an additional $13 billion of debt on the backs of taxpayers. These allegations, if true, amount to nothing less than a backdoor bailout of AIG’s creditors, including Goldman Sachs, Merrill Lynch, Société Générale and Deutsche Bank" leaves many open questions as to the true motives of the NY Fed and the Federal Reserve system overall.

To our New York Fed readers, we would like to remind them that we still have to hear an update of the status of Zero Hedge's FOIA request (which we were supposed to get a definitive answer by September 30th and somehow the Fed believes if it were to ignore the issue it will simply go away - we are currently evaluating legal options to pursue this investigation further), demanding:

"all documentation that was part of the discussions
between the Federal Reserve and Davis Polk with regard to the AIG
bankruptcy. Furthermore, I would like to see all prepared materials by
either Davis Polk or Morgan Stanley and presented to the Federal
Reserve, as well as any documents indicating how and why the Fed
decided to bailout AIG instead of pursuing a bankruptcy option for the

As a reminder, the preliminary response by the New York Fed was that "Staff searched Board records and located a large volume of potentially responsive documents." We, together with Congressman Issa, can not wait to uncover just what the advice of David Polk and Morgan Stanley was to the NY Fed vis-a-vis AIG, and also any and all internal memos that were prepared that determined it was in everyone's best interests to keep Goldman Sachs alive at what would end up being a taxpayer bailout totalling in the hundreds of billions (to date).

Zero Hedge wholeheartedly supports Darrell Issa's observation that the Fed's continuous pro-Wall Street stance begs the question:

"why the FRBNY would not drive a better bargain for the American taxpayer. If the FRBNY thought it was necessary to provide another taxpayer bailout of AIG’s counterparties, it should have come to Congress and made its case that this action was necessary. However, if the FRBNY simply paid AIG’s counterparties at par out of expediency, it raises serious questions about its judgment and motives."

We look forward to Mr. Dudley's stumbling attempts at a reply on how his actions were as equitable to the hundreds of millions of taxpayers as they were to the several thousand employees of Goldman Sachs.

Full Darrell Issa letter below:


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deadhead's picture

Thanks for the efforts to ZH and Mr. Issa.  I would hope that Mr. Towns supports this as well.

Shame on the US Congress for dereliction of duty and allowing the Fed to usurp the power of spending on behalf of American taxpayers and shame on the Executive branch for its failure to enforce the rule of law.


Anonymous's picture


Anonymous's picture

Geithner ... to the gallows!

Jim_Rockford's picture

Dudley = GS squid tentacle

Why did Issa address this to Dudley?  Why not the chairman of the NY Fed, the AFL-CIO dude?

P Rankmug's picture

Darrell Issa completely understands the corruption eroding the foundation of the market and our country.  He should be supported in any way possible.

Keyser Soze's picture

But now...the Fed was initially set up by the banks, yes? And the board is populated from bank employees? And when they leave, Fed employees go to work in banks? So...what part is the surprise?

Miles Kendig's picture

Just as long as the Fed agrees to extend the MBS purchase program past 1Q10 with another 1-2t US in agency purchases Issa will be happy.  That is all this is folks.....  A pump & dump for the Orange County real estate complex.  Remember folks, Issa is just on more..


- Layne

Anonymous's picture


Unless real estate prices impact Blackwater, Issa is not interested.

Miles Kendig's picture

Hardly.  Issa is the go to guy in the House for the R.E. industry.

Anonymous's picture

I would have thought so too, but per Open Secrets the only significant contribution from anyone related to the real estate/construction/finance complex is the electrical contractors. His district is primarily northern San Diego county, which has a very different economy than the mortgage flippers in Orange County.

Top 5 Contributors, 2009-2010, Campaign Cmte
Contributor Total Indivs PACs
SAIC Inc $15,400 $5,400 $10,000
Raytheon Co $7,500 $0 $7,500
National Electrical Contractors Assn $7,000 $0 $7,000
AT&T Inc $5,000 $0 $5,000
Consumer Electronics Assn $5,000 $0 $5,000

Top 5 Industries, 2009-2010, Campaign Cmte
Industry Total Indivs PACs
Defense Electronics $28,300 $7,800 $20,500
Computers/Internet $19,524 $1,000 $18,524
Pharmaceuticals/Health Products $19,500 $500 $19,000
Public Sector Unions $17,500 $0 $17,500
TV/Movies/Music $14,500 $1,000 $13,500

Anonymous's picture

I'd like to add the following sentence at the very end of the TD's commentary:

"including the past employees Mr. William Dudley and mr. Stephen Friedman with tens and perhaps hundreds of millions of dollars in GS stock and stock options, value of which was directly affected by the FRBNY's actions."

Anonymous's picture

"Darrell Issa completely understands the corruption eroding the foundation of the market and our country."

Yeah, because he probably invented a lot of it. If he is lifting a finger to look into this matter at all, rest assured it is a overture to a Goldman Sacks campaign contribution and has little to do with justice for the taxpayer.

Mark Beck's picture

It may be time for congressman Issa to exert his authority directly, although maybe this is his trump card.

Let me explain, the nationalization precedent with AIG is new and open for "interpretation" of "powers", as openly flaunted by the Federal Reserve Bank of NY, which really has limited authority under the constitution and the Federal Reserve Act. Congressman Issa has the same right, if not more so, to interpret these new "powers" as the FED. He should not recognize the FEDs ultimate power in this matter, and exercise his rights to investigate AIG directly. Does anyone doubt that congress has the altimate authority in this matter. No. Take a team to the AIG offices, setup camp for a couple weeks, and uncover the truth.

What would the NY FED do? file an injunction? tell the congressman he has no right to the information? ask the supreme court to rule? The FED is not in control Mr. Congressman you are. Don't ask permission. May I please uncover the truth about crimes you may have committed Mr. FED. Hell no.


Prophet of Wise's picture

Rest assured the formula remains the same. Rig the money supply to heat up the market and tell the boys ahead of time, then when the public's erection hits the cheap seats, tell the boys you're pulling out the cork so they can get lined up on the other side of the trade this time. When the whole thing blows, cry wolf and declare its "too-big-too-fail" and just must have another mind numbing bailout from the public treasury so the whole cycle can start over twenty-five years later.  

Anonymous's picture

Dear Zerohedge,
Regarding your FoIA request. Hee hee, wouldn't you know we had a trash can fire in one of our metal and concrete storage facilities and wouldn't you know. Hee hee, the 50 story building failed into it's own foot print. Gosh darn it. We'd love to help, but wouldn't you know.....

ToNYC's picture

In 455, the Vandal king Geiseric sailed his powerful fleet from the capital in Carthage, up the Tiber, finally sacking Rome.

In 2008, the Lord Blankfein and his Goldmen Sacks America.

History is not just his, but also a myth story.

There is nothing new under the sun, and that is the only free lunch there is on this planet.



sickboy's picture

Hi, I'm a big fan of the research undertaken by the musketeers here, but I'm unsure how a website, with aliases etc. can secure a FOIA? I'm totally behind the questions needing to be asked, and more importantly answered...I hope the delay from September isn't a reflection that they don't take ZeroHedge seriously, because some of the most original and insightful dredging of dead bodies, under boards comes from here.

Careless Whisper's picture

"backdoor bailout" 

correction: backdoor robbery

Why aren't all of these people being hauled in front of Congress to answer questions UNDER OATH?

agrotera's picture

Because we live in a banana republic.  Generally, all we as citizens can do is use our vote, and a loud bitching voices to spread the word.

Anonymous's picture

It's now just over a week later and Chris Dodd has filed his financial reform bill. It would be great if the president would fire Tim Geithner so that the administration and Congress can rally against Goldman and the Fed. Only by doing this, can Obama retake his original presidential brand and truly be the leader his voters elected him to be.