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Nation in brief: Watchdog probes Fed’s AIG deal

Tue., Jan. 26, 2010

WASHINGTON – An independent investigator is launching two probes into the government’s rescue of American International Group Inc. and the insurer’s subsequent payments of billions to big banks.

Neil Barofsky, the special inspector general for the Troubled Asset Relief Program, said the Federal Reserve withheld documents he requested when auditing AIG’s “backdoor bailouts” of banks it did business with, including Goldman Sachs Group Inc. Barofsky’s allegations came in prepared testimony provided to members of the House Committee on Oversight and Government Reform.

The Federal Reserve Bank of New York produced 250,000 pages of documents after committee Chairman Edolphus Towns, D-N.Y., issued a subpoena earlier this month.

Because of Towns’ subpoena, “documents have come to light that were not provided to the (watchdog) audit team during the course of the audit,” Barofsky said, leading him to “review the extent of the Federal Reserve’s cooperation.”

The committee is investigating why the New York Fed, then led by Treasury Secretary Timothy Geithner, agreed to pay banks billions to cancel their contracts with AIG, which is based in New York.

Barofsky’s second investigation is into e-mails from New York Fed lawyers instructing AIG to withhold some details of the deal from a disclosure filed with the Securities and Exchange Commission.

Biden’s son won’t run for Senate

DOVER, Del. – Vice President Joe Biden’s eldest son, Delaware Attorney General Beau Biden, dealt another body blow to the flailing Democratic Party on Monday, announcing that he will not run for the Senate seat long held by his father.

The younger Biden said he needs to remain focused as attorney general on a high-profile criminal scandal involving a pediatrician accused of sexually assaulting several patients. Prosecutors believe Dr. Earl Bradley, who was arrested in December, may have molested more than 100 children over the past decade.

“The reality is, it became increasingly clear over the last several weeks that it was impossible to mount a Senate campaign in the face of dealing with both the prosecution in Lewes as well as the things I need to do, our office needs to do, for victims,” Biden told the Associated Press.

Biden’s decision was a surprise, given that his father’s longtime confidant and former Senate chief of staff, Ted Kaufman, was appointed to the seat essentially to keep it warm for the son until this year’s election.


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