Senate and House Republicans called Thursday for hearings to look into e-mails showing that the New York Fed suppressed details about deals that allowed big banks to collect billions from the bailout of insurance conglomerate American International Group Inc.
The Democratic chairman of one committee said he was considering calling Geithner, who took over as treasury secretary in January 2009, to testify on the Hill.
E-mails between lawyers for the New York Fed and AIG show AIG wanted to disclose some details about billions in payments it made to cancel financial deals with banks, including Goldman Sachs Group Inc. and Deutsche Bank.
But lawyers for the New York Fed, which engineered AIG's bailout with the Bush administration's Treasury Department, told AIG to remove the information from a draft.
The e-mail exchanges occurred at the height of the financial crisis in the fall of 2008. They were provided in response to a request from Republican Rep. Darrell Issa.
If Geithner is called to explain his actions to Congress, it will be another tough grilling for him. Lawmakers of both parties have accused Geithner of rushing to aid Wall Street while failing to act as quickly on unemployment and the housing crisis.
"People at the grass roots are reckoning with the realities of a battered economy every day, so arguments that clearly benefit the big banks ought to be studied," said Sen. Charles Grassley, the top Republican on the powerful Senate Finance Committee.
In a statement, Grassley questioned Fed and Treasury Department claims that the details of the bailout had to be kept secret so that the country would be spared bank runs and other economic problems. He said the Finance Committee should hold hearings about the $700 billion financial bailout Congress passed at the peak of the financial crisis.
Treasury spokeswoman Meg Reilly said Geithner "played no role in these decisions" because his appointment as treasury secretary -- then President-elect Barack Obama nominated him to the post in November 2008 -- prevented him from participating in decisions about specific companies.
New York Fed General Counsel Thomas Baxter said the matter would not have been brought to Geithner's attention.
Still, Geithner's decisions on AIG continue to draw scrutiny in Washington and beyond. A recent watchdog report showed that Geithner quickly approved a decision to send billions in bailout dollars from AIG to Goldman and other banks that helped elect him president of the New York Fed.
The report said the government may have overpaid by billions of dollars to banks that have since returned to profitability and lavish pay practices.
Republican staff on the House Committee on Oversight and Government Reform also are drafting a letter calling for new hearings at which Geithner would testify on the matter, said Kurt Bardella, a spokesman for Issa, the committee's top Republican. Issa's office released the e-mails Thursday.
That committee's chairman, Democratic Rep. Edolphus Towns, said he was considering calling Geithner to testify on the matter, which he called "troubling," a spokeswoman said.
Geithner was president of the New York Fed at the time of the e-mail exchanges.
The New York Fed has countered that officials were focused on defusing the worst financial crisis in generations. It says officials were trying to protect the value of the taxpayer investment.
And it says paying the banks less or sharing more information could have sparked a global financial collapse.
Issa said the revelations raised new doubts about Geithner's qualifications.
"This begs the question, knowing what we know now: Would he have even been confirmed?" he said in a statement.
The names of the banks that benefited from AIG's bailouts earlier were kept secret by the Fed's Board of Governors, which oversees the regional banks. Fed Vice Chairman Donald Kohn told lawmakers in March that identifying the banks could upend financial markets just as they were beginning to stabilize.
"We need AIG to be stable ... and I would be very concerned that if we started giving out the names of counterparties, people wouldn't want to do business with AIG," Kohn said.
But when the Fed did reveal which banks had gotten the money, and how much they got, there was little reaction in the markets.
Reacting to Thursday's news, Republican Rep. Roy Blunt claimed Geithner "and his staff were complicit in a scheme to cover up information they viewed as politically damaging."
But New York Fed General Counsel Baxter said the Fed's financial stake made its input appropriate, "with the understanding that the final decision rested with AIG" and its lawyers.
"Our focus was on ensuring accuracy and protecting the taxpayers' interests during a time of severe economic distress," Baxter said in a statement. "All information was in fact disclosed that was required to be disclosed by the company, showing that counterparties received par value. There was no effort to mislead the public."
The proposed hearings would require support from the committees' Democratic chairmen.
Senate Finance Committee Chairman Max Baucus could not be reached for comment late Thursday.
Treasury spokeswoman Reilly said in a statement that this part of the AIG bailout "is on track to be paid back in full with interest so that taxpayers will be made whole."
"Somehow that fact that the government's loan is 'above water' gets lost in all the consternation," she said.