Paulson and Friedman asked to explain AIG pay to banks

City A.M. Reporter
FORMER US Treasury Secretary Henry Paulson and ex-New York Fed chairman Stephen Friedman will testify today at a congressional hearing on bailed-out insurer American International Group’s (AIG) payments to banks, a committee aide said yesterday.

Paulson and Friedman, both former longtime executives and chairmen at Goldman Sachs, were considered among key figures in AIG’s government bailout in the fall of 2008, along with current Treasury secretary Timothy Geithner, who was president of the New York Fed at the time. Geithner will also appear.

The committee aims to examine whether new documents made public in recent weeks show that the New York Fed used undue influence to suppress the public disclosure of information about AIG’s payment of about $62.1bn (£38.4bn) in taxpayer funds to large banks to retire credit default swaps.

Goldman Sachs received $14bn of those payments, and at the time, Friedman also sat on Goldman’s board. In December of 2008 he bought a large block of Goldman stock.

Some US lawmakers have labelled the payments a “back-door bailout” of Wall Street and foreign banks.

Paulson worked closely with Geithner and Fed Board chairman Ben Bernanke to cobble together the AIG bailout.