Fed Demanded Security Laws Shield AIG

Federal Reserve officials called on the SEC to invoke national security laws to keep details about the controversial AIG bailout hidden from the public. The Fed demanded an assurance of "special security procedures" by the SEC concerning an AIG document related to the bailout, according to emails uncovered by Reuters. The SEC kept the document locked in a safe while considering the request, and vowed to store it with "national security related files" if the request was granted. The document ultimately was not classified as a national security document.

The AIG bailout remains highly controversial because some $70 billion in "backdoor bailout" funds to AIG were funneled to 16 other financial institutions, including Goldman Sachs, that had bought credit default swaps from AIG. "The New York Fed was orchestrating what can only be characterized as an extreme effort to ensure that details of the counter-party deal stayed secret," said a statement from California Rep. Darrell Issa. (More Federal Reserve stories.)