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NY Fed Wanted National Security Exemption for AIG

Posted By Barry Ritholtz On January 25, 2010 @ 2:16 pm In Bailouts | Comments Disabled

This has to be the most outrageous headline I’ve read since whatever the last headline was that made me apoplectic:

SEC mulled national security status for AIG details [1]

In a little noticed story over the weekend, Reuters has discovered that the New York Federal Reserve want to invoke national Security rules to keep the details of the bailout a secret.

It reveals the degree to which the NY Fed was a) In a state of sheer Panic; b) Captured by the banks they regulate; and c) Failed to understand the basic premise of Democracy.

Aside from what this means to the ongoing tenure of Tim Orwell Geithner at Treasury, it shows how utterly clueless the people who bailed out the banks and their bond holders actually are.

Here is Matthew Goldstein of Reuters:

“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 emails 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 emails.

The emails from early last year reveal that officials at the New York Fed were only comfortable with AIG submitting a critical bailout-related document to the U.S. Securities and Exchange Commission after getting assurances from the regulatory agency that “special security procedures” would be used to handle the document.

The SEC, according to an email sent by a New York Fed lawyer on January 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 email, 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, if central bankers wanted to stop the information from becoming public.”

Perhaps it would be best if someone showed Timmy to the door . . .

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Source:
SEC mulled national security status for AIG details [1]
Reuters, Jan 24 2010
Matthew Goldstein
http://www.reuters.com/article/idUSTRE60N1S220100124


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[1] SEC mulled national security status for AIG details: http://www.reuters.com/article/idUSTRE60N1S220100124

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