Lawmaker seeks Geithner records in AIG bailout

WASHINGTON (Reuters) - The chairman of a U.S. congressional panel said on Wednesday he has wants all of Treasury Secretary Timothy Geithner's communications about the Federal Reserve's payouts to counterparties of insurer AIG Inc at 100 cents on the dollar after a government bailout.

Geithner was the president of the New York Fed in September 2008, when the government stepped in to rescue American International Group at a cost to taxpayers of $180 billion.

House of Representatives Oversight Committee head Edolphus Towns has called the Fed's decision to compensate in full firms that had contracts with AIG, a "backdoor bailout." He said he has also subpoenaed Geithner's e-mails, phone logs and meeting notes about the decisions surrounding public disclosure of the counterparty payments.

Towns questioned why the Fed made full payments to some of the most profitable companies in the world when AIG was facing bankruptcy. He said AIG documents suggest the New York Fed wanted to keep details of the counterparty payments hidden.

"When average people were losing their homes and their jobs, the Bush Administration decided to use taxpayer dollars to give a backdoor bailout to the biggest players on Wall Street," Towns said.

"We need to understand why and how taxpayer dollars were used to bailout the same people who helped cause the financial crisis in the first place," the New York Democrat said.

Treasury has said that Geithner was "recused" from involvement in any matters related to AIG around the time that his nomination as Treasury Secretary was announced by the White House on November 24.

The Obama administration and New York Fed have said that Geithner was not aware of any emailed advice by New York Fed lawyers to AIG to limit disclosures about payments it was making to banks on derivatives contracts.

Towns is also asking for emails, phone logs and meeting notes from former New York Fed Board Chairman Stephen Friedman, New York Fed General Counsel Thomas Baxter, and the New York Fed official responsible for monitoring the relationship with AIG, Sarah Dahlgren.

(Reporting by Mark Felsenthal)