Federal Reserve Chairman Ben Bernanke on Tuesday asked a government auditor to review the Fed's actions in bailing out American International Group Inc. in 2008, as controversy persisted over the central bank's role in extending billions in credit to the insurer.
Bernanke, in a letter to Acting Comptroller General Gene Dodaro, said the Fed would make available to the Government Accountability Office all documents and personnel necessary to conduct the review.
"In this spirit, to afford the public the most complete possible understanding of our decisions and actions in this matter, and to provide a comprehensive response to questions that have been raised by members of Congress, the Federal Reserve would welcome a full review by GAO of all aspects of our involvement in the extension of credit to AIG," Bernanke wrote.
Bernanke's request comes as the U.S. House of Representatives Oversight and Government Reform Committee is gearing up for a hearing next week into whether the New York Federal Reserve improperly limited public disclosures about payments to banks to unwind $62.1 billion in credit default swaps.
At the time of the bailout, U.S. Treasury Secretary Timothy Geithner headed the New York Fed.
Geithner, Bernanke and former U.S. Treasury Secretary Henry Paulson are considered key architects of the bailouts, including of AIG, that marked the height of the financial crisis in September 2008.
The committee asked Geithner and Paulson to testify at the Jan. 27 hearing.
Bernanke wrote to Dodaro that the Fed extended a credit facility to AIG "to prevent the imminent disorderly failure of the company, an event that would likely have led to a significant intensification of an already severe financial crisis and a further worsening of global economic conditions."
Bernanke added that the Fed loan facility was fully secured and should be fully repaid by Sept. 16, 2013, five years after it was granted, as the company reorganizes and unwinds its operations.
He said the Fed has provided to Congress and bailout oversight bodies "significant information" about its loans to AIG.
"We have provided and continue to provide this information because it is important that the Congress and the public understand that, in our actions regarding AIG, the Federal Reserve and the Treasury acted in the best interests of the United States to preserve the financial system and to protect households and businesses from potentially calamitous effects on the U.S. economy, while doing everything possible to protect the American taxpayer," Bernanke wrote.
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