Reporting from New York — U.S. securities regulators originally treated the New York Federal Reserve's bid to keep secret many of the details of the American International Group bailout like a request to protect matters of national security, according to e-mails obtained by Reuters.
The request to keep the details secret were made by the New York Federal Reserve -- a regulator that helped orchestrate the bailout -- and by the giant insurer itself, according to the e-mails.
The e-mails from early last year reveal that officials at the New York Fed were comfortable with AIG submitting a crucial bailout-related document to the U.S. Securities and Exchange Commission only after getting assurances from the regulatory agency that "special security procedures" would be used to handle the document.
The SEC, according to an e-mail sent by a New York Fed lawyer on Jan. 13, 2009, agreed to limit the number of SEC employees who would review the document to just two and keep the document locked in a safe while the SEC considered AIG's confidentiality request.
The SEC had also agreed that if it determined the document should not be made public, it would be stored "in a special area where national security-related files are kept," the lawyer wrote.
In another e-mail, a New York Fed official said the SEC suggested in late December 2008 that AIG file the document under seal and then apply to the regulatory agency for so-called confidential treatment.
The e-mails were included in the mountain of documents the New York Fed turned over last week to the House Committee on Oversight and Government Reform, which will hold a hearing Wednesday into the AIG bailout and the New York Fed's role in trying to keep specific terms of that Fed-engineered rescue in November 2008 from being made public.
More than a year later, the Fed's bailout of AIG remains controversial because it funneled nearly $70 billion to 16 big U.S. and European banks that had bought credit default swaps from AIG.
Lawmakers on Capitol Hill have labeled the AIG bailout, in which the New York Fed created a special entity to purchase those securities from the banks at essentially their face value, a "backdoor bailout" for the 16 financial institutions.
The e-mails, along with others that have become public in recent weeks, reveal that some at the New York Fed had gone to great lengths to keep the terms of the bailout private and the SEC may have played a role in the secrecy.
"The New York Fed was orchestrating what can only be characterized as an extreme effort to ensure that details of the counterparty deal stayed secret," Rep. Darrell Issa from California, the ranking Republican on the House Oversight Committee, said through a spokesman. "More and more it looks as if they would've kept the details of the deal secret indefinitely, if they could have."
In March, some of the secrecy surrounding the AIG bailout began to fall away when the insurer, under pressure from Congress and the SEC, agreed to publicly name the 16 banks that got money in the rescue package and how much each received.
But AIG, largely at the prodding of the New York Fed, refused to make public all of the information in the controversial document, officially called "Schedule A -- List of Derivative Transactions," according to the e-mails turned over by the central bank to Capitol Hill. AIG continued to seek confidential treatment from the SEC for the redacted portions of the five-page filing.
Last May, the SEC did grant AIG's request for confidential treatment for the remaining redacted portions of the Schedule A filing. The redacted parts include the CUSIP, or trading ID, number for each security on which AIG wrote a credit default swap contract, as well as the face value of each individual security that AIG had insured against default.
The SEC agreed to let AIG keep that information confidential until November 2018 -- or the 10th anniversary of the bailout.
The New York Fed has argued the information needs to remain confidential to enable BlackRock Inc., which manages the portfolio of securities bought from the banks, to compete with hedge funds on an even playing field.
U.S. Treasury Secretary Timothy F. Geithner was set to testify before the House Oversight Committee on Wednesday. Geithner, who led the New York Fed at the time of the AIG bailout, has said he was not privy to the discussions about what information AIG should or should not release.
New York Fed spokeswoman Deborah Kilroe said Friday that the more than 250,000 pages of documents provided by the central bank to Congress "demonstrate that the FBNY's actions assisted AIG in ensuring the accuracy of its disclosures and protected important U.S. taxpayer interests."
The SEC's stance