Treasury Secretary Geithner agrees to testify about secretive bailout deals with AIG, Goldman

Geithner will testify on secretive bailout deals

WASHINGTON — Treasury Secretary Timothy Geithner is set to testify before a House committee probing his role in deals that sent billions of bailout dollars to Goldman Sachs Group Inc. and other big banks.

Rep. Edolphus Towns, D-N.Y., said in a statement Thursday that Geithner will appear at a Jan. 27 hearing of the House Committee on Oversight and Government Affairs.

Towns, the committee’s chairman, said last week that he wanted Geithner to testify about the bailout of American International Group Inc. that Geithner oversaw as president of the Federal Reserve Bank of New York.

Geithner approved the decision to send billions of dollars from AIG’s bailout to banks including Goldman, Morgan Stanley, Deutsche Bank and Societe Generale to cancel their financial contracts with AIG.

A watchdog report said the deals might have cost taxpayers billions more than necessary because Geithner did not ask the banks for concessions.

AIG had been negotiating the values of banks’ contracts before the government took it over in September 2008. Geithner considered reducing the payments for two days before paying the banks off in full, the report said.

The Federal Reserve refused for months to say which banks had benefited from the “backdoor bailouts.” The committee is investigating why the banks were paid in full and why officials including Geithner refused to name them.

The first call for a hearing on the matter came from California Rep. Darrell Issa, the committee’s top Republican. Towns also heeded Issa’s call to subpoena the New York Fed for Geithner’s e-mails and records on the AIG matter.

The Fed suppressed an earlier request from Issa for documents it had given the special inspector general for the bailouts, who issued the earlier report questioning Geithner’s decisions on AIG.

Issa said Thursday he is concerned about the Fed’s secrecy in light of a proposal to expand its power to oversee the financial system.

“This is not and never has been about Tim Geithner,” Issa said in a statement. “It just so happens that he was at the helm at the time.”

The probe will give a fuller picture of one of the government’s bailout decisions that contributed to calls for financial reform.

The Senate is negotiating a compromise on a proposed overhaul of financial regulation. Lawmakers disagree about proposals to expand the Fed’s powers and to establish a system for temporarily bailing out large financial firms while they are dissolved.

In a March 4 Finance Committee hearing, Geithner refused to explain why Treasury wouldn’t name the banks that got AIG bailout money.

Treasury spokesman Andrew Williams did not respond a request for comment.