http://dealbook.blogs.nytimes.com/2010/01/26/paulson-distances-himself-from-aig-payments/?ref=business
Former Treasury Secretary Henry M. Paulson Jr. has a very direct message for the House committee investigating the bailout of the American International Group: Don’t blame me for paying about 100 cents on the dollar to A.I.G.’s trading partners to unwind tens of billions of dollars in credit default swaps.
“I was not involved in any of the decisions made with respect to those payments, nor was I involved in any of the decisions about A.I.G.’s public disclosure of those payments,” Mr. Paul said in his prepared testimony for a hearing of the House Oversight and Government Reform Committee on Wednesday. “Those matters were handled by the Federal Reserve Bank of New York and the Federal Reserve Board. They sought to make appropriate decisions on those matters.”
Mr. Paulson asserted in his prepared testimony that “the rescue of A.I.G. was necessary,” and that he, Mr. Geithner and Ben S. Bernanke, the Federal Reserve chairman, “acted properly and in the best interests of the country.”
But Neil M. Barofsky, the special inspector general of the Troubled Asset Relief Program, is critical of the New York Fed’s limited efforts to negotiate concessions, or “haircuts,” from A.I.G.’s counterparties.
In his prepared testimony for Wednesday’s hearing, Mr. Barofsky said that the New York Fed “refused to use its considerable leverage as the regulator of several institutions to compel haircuts” because it was acting on behalf of A.I.G. instead of as a regulator, and that the New York Fed “was uncomfortable interfering with the sanctity of the counterparties’ contractual rights with A.I.G., which entitled them to full par value.”
He also noted that the New York Fed had no actual plans to carry out such a threat, and that it was concerned about the reaction of the credit rating agencies if haircuts were imposed, since that could viewed as the New York Fed “backing away from fully supporting A.I.G.”
Mr. Barofsky said in his testimony that the New York Fed was effectively paying A.I.G.’s counterparties par value “for securities that collectively had a market value, based on the amount of the collateral payments, of approximately 48 cents on the dollar.”
