NU Online News Service, Jan. 22, 2:00 p.m. EST

WASHINGTON

Two members of the House Oversight and Government Reform Committee are voicing support for a sweeping Government Accountability Office study of the Federal Reserve Board's role in American International Group's decision to make whole its bank trading partners.

In a statement, Rep. Edolphus Towns, D-N.Y., and Rep. Elijah Cummings, D-Md., said they had officially asked the GAO to launch a "broad investigation" into Federal financial assistance provided to American International Group (AIG).

Rep. Towns is the chairman of the committee and Rep. Cummings a senior member. Rep. Cummings was also the instigator of congressional efforts to force AIG to disclose the bonuses it was paying to the staff of its Financial Products unit.

This unit oversees AIG's investments in credit default swaps and other speculative instruments that played a key role in its need for a federal bailout in September 2008.

Rep. Cummings' efforts to force disclosure of the bonus payments also led to congressional investigation into the issue of high bonuses paid by banks that were receiving billions of dollars in federal assistance at the time.

That prompted legislation that mandates federal oversight of institutions receiving federal aid.

Rep. Towns and Rep. Cummings made the request in a letter to the GAO Acting Comptroller General Gene Dodaro.

"We believe that such a review would be an important complement to investigations conducted by the House Oversight and Government Reform Committee and the Special Inspector General for the Troubled Assets Relief Program (SIGTARP)," Rep. Towns and Rep. Cummings said in the letter.

Therefore, "we request that the GAO undertake a full review of all aspects of federal assistance–whether through the Federal Reserve, the U.S. Department of the Treasury, or any other public entity–provided to AIG from 2007 to the present," the letter said.

They requested that the GAO review all aspects of Federal assistance provided to AIG from 2007 to the present by the Federal Reserve, U.S. Treasury Department or any other government entity.

Specifically, Towns and Cummings asked that the review include an examination of payments by AIG to counterparties of credit default swap contracts; who made the decision to pay the counterparties in full; and the steps taken to prevent a full public disclosure of the counterparty payments.

In addition, the letter written by Rep. Towns and Rep. Cummings requested details of the decision not to allow AIG to file for bankruptcy and the lessons learned from AIG's rescue.

The letter follows a request by Ben Bernanke, chairman of the Fed, for a GAO study of its involvement in AIG. In his letter, Mr. Bernanke, said he would provide all records and personnel necessary for a GAO review.

Later that day, the Federal Reserve Board of New York said in a letter to the GAO that it would also support such a study and provide all data relating to its oversight of AIG.

The Fed Bank of New York has assumed responsibility for managing the Fed's investment of what at one point totaled $182 billion in cash to AIG in return for 79.9 percent of its stock.

A hearing on the issue will take place Jan. 27 before the oversight panel.