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January 19, 2010

Bernanke: Let the sun shine in

With lawmakers from both parties circling the wagons and his confirmation for a second term at the helm in play, Federal Reserve Chairman Ben Bernanke on Tuesday told the Government Accountability Office that he'd welcome a complete audit of the bailout of disgraced insurer American International Group.

"The Federal Reserve will make available to the GAO all record and personnel necessary to conduct this review," the Fed said in a letter to GAO Acting Comptroller Gene Dodardo.

A House investigative committee is calling Treasury Secretary Tim Geithner to testify on Jan. 27 on how the rescue of September 2008 rescue of AIG came to include a payment of about $62 billion to Goldman Sachs, Merrill Lynch and a number of large foreign banks. The payment was not disclosed when made.

The New York Fed, headed at the time by Geithner, determined that it would impossible to get these banks to take anything less than complete payment for bets made through complex insurance-like instruments called credit-default swaps. Lawmakers have labeled the payment a backdoor bailout for Wall Street.

Since the New York Fed is part of the Federal Reserve structure, Bernanke has been under fire for a $182 billion bailout of AIG that he himself has said repeatedly was distasteful but necessary to protect the global financial system.

Bernanke's term as chairman ends on Jan. 31, and President Barack Obama nominated him for a second term months ago. The Senate Banking Committee sent his nomination forward late last year, and a key procedural vote on Bernanke could come as early as Friday to determine if there are 60 votes to cut off debate on his confirmation.

The Fed letter to Dodardo is widely viewed as an attempt to beat back the controversy over the AIG bailout. The letter mostly restates the reasoning for the bailout and the numerous ways in which the Fed is making public information about ongoing aspects of the bailout.

One of Bernanke's harshest critics, Sen. Bernie Sanders, an independent from Vermont, said in a statement late Tuesday that the "American people have a right to know exactly what happened to all of the money Ben Bernanke’s Fed put at risk, not just to bail out AIG but the entire financial sector.  Trillions of taxpayer dollars are at stake.”

Sanders added that, "This money does not belong to Chairman Bernanke.  It belongs to the American people.  Now that the Fed has finally agreed to a GAO audit of its involvement with AIG, it is time for the sun to shine on the entire Federal Reserve."

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