Pressure grows for AIG audit

Leading US congressmen have added their voices to calls for a comprehensive audit of the bailout of collapsed insurer AIG in 2008, as the House Committee on Oversight and Government Reform (HOGR) prepares for hearings on the issue tomorrow.

Committee chairman Edolphus Towns and fellow committee member Elijah Cummings asked Gene Dodaro, the acting head of the Government Accountability Office, to audit the bailout on January 22, three days after a similar request from Federal Reserve chairman Ben Bernanke. The audit, they wrote, should concentrate on the New York Fed's decision to pay AIG's credit default swap counterparties in full through the Maiden Lane III rescue vehicle rather than letting it slip into bankruptcy, and the Fed's subsequent efforts to keep the details of the payments secret.

In written testimony submitted to the Committee, Neil Barofsky, the special inspector-general for the Troubled Assets Relief Program, said he was already investigating the New York Fed's failure to disclose information about the bailout – the HOGR is also conducting its own investigation. The names of AIG's counterparties were kept secret until March 2009, and AIG successfully lobbied the Securities and Exchange Commission in May to keep other details confidential until 2018.

The last week has seen a stream of revelations on the details of the bailout, including news of the New York Fed's pressure on AIG to keep various details secret – most recently, reports AIG insisted information it submitted to the SEC should be kept in the same high-security environment as documents considered vital to national security.

Tomorrow, the Committee will hear testimony from Timothy Geithner – now US Treasury secretary but at the time of the bailout the chairman of the New York Fed – and from Barofsky, who has previously criticised the bailout, in particular the Fed's apparent inability to negotiate haircuts from AIG's major counterparties. The New York Fed's general counsel, Thomas Baxter, and the former chief financial officer of AIG's financial services division, Elias Habayeb, will also appear before the Committee.

Hank Paulson, Treasury secretary at the time of the bailout, and Stephen Friedman – then chairman of the New York Fed – were also invited to testify, but have not confirmed their attendance. Both men are former chairmen of Goldman Sachs, one of the largest  counterparties of AIG, which received $5.6 billion as a result of the bailout. Friedman remained a director while serving as chairman of the New York Fed, but resigned in May 2009 after his purchase of $3 million of Goldman Sachs shares in December 2008 was criticised as a conflict of interest.