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AIG Bail Out Shows Fed's Favoritism, Patrikis, Willumstad and Revolving Doors

Byline: Matthew Russell Lee of Inner City Press: News Analysis

NEW YORK, September 17 -- As the U.S. Federal Reserve bails out another Wall Street conglomerate, this time AIG, the Fed's favoritism is increasingly in question. Why AIG and Bear Stearns but not Lehman Brothers? On AIG, it's worth noting for example that former Federal Reserve Bank of New York chief counsel Ernest Patrikis went through the revolving door directly to a similar position at AIG, where he showed himself quite willing to call regulators, former colleagues, to get them to side with AIG on consumer protection and other issues.

  When AIG was applying for approvals to buy American General, along with its already controversial subprime lending business, Patrikis and AIG convinced regulators to ignore applicable law about granting public hearings. Patrikis even called New York regulators and assured them AIG would meet with its critics, including Fair Finance Watch -- and in full disclosure Inner City Press -- after the deal was consummated. But AIG quickly returned to pure hardball, threatening to file complaints against its critics if they continued to oppose it.

Willumstad, at right, with others who created chaos: Weill and his Prince

  Another AIG connection is Robert Willumstad, formerly Citigroup's number two official.  Citigroup from its beginnings has always been a Fed favorite. The merger of Travelers Insurance and Citicorp, then illegal under the Glass Steagall Act, was secretly pre-approved by the Fed. The Fed's meetings about the deal, belatedly disclosed in a series of letters referring almost comically to the merger of "Red" and "Blue," arrived at a two year grace period during which Citigroup could lobby to repeal applicable law. The AIG bail out also puts off the reckoning for two years. Much further lobbying can be done in that time.

Watch this site, and this (UN) debate.

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Click here for a Reuters AlertNet piece by this correspondent about Uganda's Lord's Resistance Army. Click here for an earlier Reuters AlertNet piece about the Somali National Reconciliation Congress, and the UN's $200,000 contribution from an undefined trust fund.  Video Analysis here

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