Matthew Goldstein at Reuters:
U.S. securities regulators originally treated the New York Federal Reserve’s bid to keep secret many of the details of the American International Group bailout like a request to protect matters of national security, according to emails obtained by Reuters.
The request to keep the details secret were made by the New York Federal Reserve — a regulator that helped orchestrate the bailout — and by the giant insurer itself, according to the emails.
The emails from early last year reveal that officials at the New York Fed were only comfortable with AIG submitting a critical bailout-related document to the U.S. Securities and Exchange Commission after getting assurances from the regulatory agency that “special security procedures” would be used to handle the document.
The SEC, according to an email sent by a New York Fed lawyer on January 13, 2009, agreed to limit the number of SEC employees who would review the document to just two and keep the document locked in a safe while the SEC considered AIG’s confidentiality request.
The SEC had also agreed that if it determined the document should not be made public, it would be stored “in a special area where national security related files are kept,” the lawyer wrote.
David Frum at FrumForum:
Let’s get this straight. The underwear bomber’s information is so unimportant to the security of the United States that he can be read a Miranda warning and urged to stop talking. But the details of the AIG deal – they are national security secrets so important that the SEC wanted to classify them top-secret???
Rachael Granby at Seeking Alpha
The SEC, whose mission is to protect investors, has an entire area of files related to “national security” and an outside lawyer apparently was familiar with this? What’s in those files?
Barry Ritholtz at The Big Picture:
In a little noticed story over the weekend, Reuters has discovered that the New York Federal Reserve want to invoke national Security rules to keep the details of the bailout a secret.
It reveals the degree to which the NY Fed was a) In a state of sheer Panic; b) Captured by the banks they regulate; and c) Failed to understand the basic premise of Democracy.
Aside from what this means to the ongoing tenure of Tim Orwell Geithner at Treasury, it shows how utterly clueless the people who bailed out the banks and their bond holders actually are.
Sports fans, this request can point to only one of two conclusions. Either the folks at the Fed are suffering from a massive case of grandiosity, or something very incriminating is in that file. There is simply no bailout-related information that legitimately warrants that level of security treatment AFTER THE FACT (even in the very unlikely event AIG officials possessed information related to terrorist financial networks, which is legitimately limited to parties with high-level security clearances, I can’t imagine that it would be the sort of thing that would also be subject to disclosure in SEC filings, and hence would be subject to back and forth among the Fed, AIG, and the SEC).
