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.