By Gretchen Morgenson and Louise Story, The New York Times

Weeks after rescuing the American International Group with an $85 billion taxpayer loan in late 2008, Federal Reserve Board officials rejected a proposal that would have forced the insurer’s trading partners to return $30 billion in cash that they had received from AIG in the preceding months.

The Fed chose instead to let the banks keep the cash and to receive additional billions from taxpayers. This decision was made, internal documents show, after two Fed governors expressed concern that such a plan might be “a gift” to the company’s trading partners, including Goldman Sachs and Societe Generale, a major French bank. The documents were provided to Congressional investigators by the Federal Reserve and were obtained by The New York Times.

Lawyers for the Fed argued in the documents that it did not have the legal authority to guarantee AIG’s obligations. The New York Fed’s chief counsel is expected to reiterate this point in Congressional testimony on Wednesday.

Of all the government rescues undertaken during the credit crisis of 2008, none has stirred more outrage and raised more questions than the bailout of AIG, a global insurer that has received $180 billion in taxpayer commitments since its collapse 16 months ago. More fireworks are expected Wednesday as lawmakers hear testimony about the insurer’s rescue from the two men most closely associated with it: Timothy F. Geithner, the Treasury secretary and former president of the New York Fed; and Henry M. Paulson Jr., the former secretary of the Treasury.

The hearing, convened by the House Committee on Oversight and Government Reform led by Edolphus Towns, Democrat of New York, is expected to focus on the Fed’s decision to pay billions to the large banks doing business with AIG to unwind the insurance contracts they had struck with the company.

Of particular interest to many in Congress is why those negotiating on behalf of the taxpayers did not push the banks to make concessions like returning the collateral to AIG or accepting less than full value for their contracts with the insurer.

“I really want to find out what led them to pay 100 percent to the counterparties,” Mr. Towns said Tuesday. “The whole credibility of the Federal Reserve is called into question when you do things like that in secrecy, and that is something we need to change the culture of.”

The hearings come at a difficult moment for the Obama administration, which is still recovering from the loss of the Massachusetts Senate seat in a special election last week. While the A.I.G. bailout was conducted during the previous administration, its oversight by Mr. Geithner makes the rescue a problem for the current administration.

Democrats and Republicans appear eager to pillory him at the hearing for his role in the bailout.

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By David Lawder and Mark Felsenthal, Reuters

WASHINGTON — The New York Federal Reserve Bank actively worked with bailed-out insurer AIG to build a case against disclosing details of AIG’s payments to banks just days after the insurer considered making them public, documents released late on Saturday showed.

Lawyers for the New York Fed, which had taken over a pool of AIG assets as part of a $180 billion government bailout of the insurer in 2008, advised that AIG maintain a “confidential treatment request” from the Securities and Exchange Commission, according to emails provided by U.S. Rep. Darrell Issa, a U.S. lawmaker probing the matter.

A separate batch of emails made public this month showed that the New York Fed had advised AIG not to disclose the payments in a securities filing in late 2008.

The email traffic has raised questions about the role of Treasury Secretary Timothy Geithner, who ran the New York Fed at the time of the AIG bailout and the insurer’s payment of some $62.1 billion to banks to liquidate credit default swaps it had sold to them.

Geithner is among those due to testify on the AIG payments and efforts to limit public disclosures about them at a Jan. 27 hearing of the House of Representatives Oversight and Government Reform Committee. Former Treasury Secretary Henry Paulson also has been asked to appear before the panel.

Geithner has said Fed officials had no choice but to allow AIG to pay the banks in full, but has denied any involvement in discussions to suppress disclosures. He reclused himself from matters involving AIG after being nominated for Treasury Secretary in November 2008.

The latest emails show a proposed letter to the SEC requesting the withdrawal of the confidential treatment request around March 10, 2009, after some information on payments was reported by media, but the letter was never sent to the SEC.

Instead of withdrawing the confidentiality request, the emails show further exchanges between the New York Fed and AIG lawyers that led to the insurer days later submitting a new confidentiality request. A draft of the request shows AIG asked the SEC to keep secret details about specific securities, their notional values, collateral posted against them, and mark-downs in their market values.

AIG argued in the request that the assets held in a New York Fed investment vehicle called Maiden Lane III that was managed by BlackRock Inc. could lose value if the information was disclosed.

“If market participants acquired information as to the composition of ML III’s securities portfolio or if the prices paid by ML III were known to market participants, BlackRock’s efforts to effectively manage ML III’s portfolio of securities would be seriously undermined,” AIG said in the confidentiality request.

By this time, AIG had already been under some pressure by the SEC to disclose the counterparty payments, and on March 15 the company disclosed gross sums paid to individual banks, including posted collateral and direct payments totaling $62.1 billion, for 100 cents on the dollar — a disclosure that stoked public rage about the AIG bailout.

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By Hugh Son, Bloomberg

NEW YORK — The Federal Reserve Bank of New York, then led by Timothy Geithner, told American International Group Inc. to withhold details from the public about the bailed-out insurer’s payments to banks during the depths of the financial crisis, e-mails between the company and its regulator show.

AIG said in a draft of a regulatory filing that the insurer paid banks, which included Goldman Sachs Group Inc. and Societe Generale SA, 100 cents on the dollar for credit-default swaps they bought from the firm. The New York Fed crossed out the reference, according to the e-mails, and AIG excluded the language when the filing was made public on Dec. 24, 2008. The e-mails were obtained by U.S. Rep. Darrell Issa, ranking member of the House Oversight and Government Reform Committee.

The New York Fed took over negotiations between AIG and the banks in November 2008 as losses on the swaps, which were contracts tied to subprime home loans, threatened to swamp the insurer weeks after its taxpayer-funded rescue. The regulator decided that Goldman Sachs and more than a dozen banks would be fully repaid for $62.1 billion of the swaps, prompting lawmakers to call the AIG rescue a “backdoor bailout” of financial firms.

“It appears that the New York Fed deliberately pressured AIG to restrict and delay the disclosure of important information,” said Issa, a California Republican. Taxpayers “deserve full and complete disclosure under our nation’s securities laws, not the withholding of politically inconvenient information.” President Barack Obama selected Geithner as Treasury secretary, a post he took last year.

Issa requested the e-mails from AIG Chief Executive Officer Robert Benmosche in October after Bloomberg News reported that the New York Fed ordered the crippled insurer not to negotiate for discounts in settling the swaps. The decision to pay the banks in full may have cost AIG, and thus taxpayers, at least $13 billion, based on the discount the insurer was seeking.

The e-mail exchanges between AIG and the New York Fed over the insurer’s disclosure of the transactions show that the regulator pressed the company to keep details out of the public eye. Issa’s comments add to criticism from Republican lawmakers, including Sen. Chuck Grassley of Iowa and Rep. Roy Blunt of Missouri, who wrote letters in the past two months demanding information from Geithner, 48, about the costs of the AIG bailout.

AIG’s Dec. 24, 2008, filing was challenged privately by the U.S. Securities and Exchange Commission, which polices the adequacy of disclosures by publicly traded firms. The agency said in a letter to then-CEO Edward Liddy six days later that AIG should provide a Schedule A, which lists collateral postings for the swaps and names the bank counterparties that purchased them from the company. The Schedule A was disclosed about five months later in a filing.

“Our position has always been that if AIG’s securities lawyers determine that AIG is legally obligated to make a particular filing or disclosure, then that is what AIG must do,” said Jack Gutt, a spokesman for the New York Fed, in an e-mailed statement. Gutt said it was appropriate for the New York Fed, as party to deals outlined in the filings, “to provide comments on a number of issues, including disclosures, with the understanding that the final decision rested with AIG’s securities counsel.”

Mark Herr, a spokesman for New York-based AIG, declined to comment. Andrew Williams of the Treasury referred questions to the New York Fed.

Kathleen Shannon, an AIG deputy general counsel, wrote to the insurer’s executives in a March 12, 2009, e-mail about the conflicting demands from the New York Fed and SEC.

“In order to make only the disclosure that the Fed wants us to make,” Shannon wrote, “we need to have a reasonable basis for believing and arguing to the SEC that the information we are seeking to protect is not already publicly available.”

AIG disclosed the names of the counterparties, which included Deutsche Bank AG and Merrill Lynch & Co., on March 15. The disclosure said AIG made more than $27 billion in payments without identifying the securities tied to the swaps or listing the value of individual purchases by each bank, details the Fed wanted to keep out, according to the March 12 e-mail from AIG’s Shannon.

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GDP: Great Day to Play

Good Day,

Friday’s market sessions in precious metals started off on a tamer note, following the best gains in gold in three weeks. Explanations follow. The recapture of the $1045 area is noteworthy, although analysts we polled during the wee hours overseas are trying to define the move as everything from a ‘one-hit wonder’ to the ‘re-ignition of what we saw during most of October.’

The Bloomberg weekly survey foresees weaker gold prices come next week - not by a large margin (57% bearish)- but still focusing on a potential comeback by the US currency, the early signs of which became visible this past Monday. Demand for the yellow metal once again slipped away in India, following signs of life during the earlier part of the week when values came close to $1025 per ounce. The country recorded its sixth straight month of declining gold imports, despite a decent gain during September – in anticipation of festival-related sales.

New York spot dealings opened with a $2.60 loss in gold bullion, which was quoted at $1043.20 bid, as against a euro-dollar seen at $1.4798 and the USD index steady-to-higher, at 76.05, with little in the way of fresh news thus far this morning. Oil prices gave back about 50 cents of their whopper-sized Thursday gains, slipping to $79.32 per barrel. Risk traders took a latte break this morning, and this gave the dollar a moment to try to re-group.

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Read the rest of Gold, Silver, Metal Prices: Commentary – 10/30/2009 (2,324 words)

New York gold futures ended lower Tuesday for the fourth straight day as the US dollar advanced on news of a decline in consumer confidence. Silver was hit exceptionally hard for the second straight day, falling more than 3 percent. Platinum declined as well. In other markets, crude oil finished 1 percent higher and US stocks ended mixed.

New York precious metals figures follow:

• Silver for December delivery plummeted 55.5 cents, or 3.2 percent, to $16.540 an ounce. It ranged from $17.250 to $16.500.

• Gold for December delivery declined $7.40, or 0.7 percent, to $1,035.40 an ounce. The yellow metal ranged from $1,044.30 to $1,032.90, which was the lowest level since Oct. 6.

• January platinum fell $26.80, or 2.0 percent, to $1,319.00 an ounce.

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Read the rest of Gold Drops for Fourth Day, Silver Plunges, Stocks Mixed (2,493 words)

Spot Silver prices opened this week at $17.48. Silver reached a high of $17.97 on Friday, October 23rd. The low for silver occurred on Thursday, October 22nd at $17.38. Silver ended the week up $0.23 at $17.71. This week, investors concentrated on 2009 1 oz. Silver American Eagles, 2010 1 oz. Canadian Silver Maple Leafs and 1 oz. Sunshine Minting Silver Rounds.

Platinum:

Spot Palladium prices opened this week at $331.00, and ended the week up $7.00 at $338.00. 2009 1 oz. Palladium Maple Leafs, 1 oz. Pamp Suisse Palladium Bars and 10 oz. Pamp Suisse Palladium Bars are consistently popular palladium items.

After gold prices crossed above the psychological level of $1000, the target price for gold became a very popular topic on the markets. Jim Rogers predicts gold prices to go even to $2000. Some of latest analysis from Adam Hewison about gold:

In the first video Adam provides some mid and long term analysis for the US dollar, S&P 500 and gold.

Read more »

Gold ended higher Wednesday and for the fourth straight day as a decline in the US dollar propped precious metals higher — silver and platinum advanced as well. In other markets, crude oil surged above $81 a barrel to a one-year high while US stocks retreated from their own earlier one-year highs.

New York precious metals figures follow:

• Silver for December delivery rose 26.7 cents, or 1.5 percent, to $17.825 an ounce. It ranged from $17.300 to $17.835.

• Gold for December delivery climbed $5.90, or 0.6 percent, to $1,064.50 an ounce. The yellow metal ranged from $1,048.10 to $1,065.70.

• January platinum advanced $18.10, or 1.3 percent, to $1,374.40 an ounce.

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Read the rest of Gold, Silver Rise; Stocks Fall (1,839 words)

By Jennifer Ablan and Joseph A. Giannone

Mon Oct 19, 2009 5:17pm EDT

NEW YORK, Oct 19 (Reuters) – David Einhorn, the hedge fund
manager who had warned on Lehman Brothers’ precarious finances,
on Monday said he is buying gold and betting that interest
rates will rise as he lambasted the U.S. government’s financial
chiefs for short-sighted policy decisions.

The exploding size of the national deficit, which reflects
government policies that have simply rewarded bad behavior with
massive bailouts, will make gold and gold stocks as well as
call options on higher rates good investments, said Einhorn.

Speaking at the fifth Annual Value Investing Congress in
New York, Einhorn had harsh criticism for Federal Reserve
Chairman Ben Bernanke and Treasury Secretary Timothy Geithner.

“Although our leaders ought to be making some serious
choices, they appear too trapped in short-termism and special
interests to make them,” he said, calling Bernanke and Geithner
“quintessential short-term decision makers.

“They explicitly do whatever it takes to solve one problem
at a time and deal with the unintendend consequences later.”

Einhorn, the president of Greenlight Capital, with more
than $5 billion in assets under management, advocated buying
both physical gold and gold stocks “if monetary and fiscal
policies go awry.”

He noted, “Gold does well when monetary and fiscal policies
are poor and does poorly when they are sensible.”

Gold rose to a record high last Wednesday above $1,070 an
ounce.

Of the government’s recent policies, he said, “Over the
last couple of years, we have adopted a policy of private
profits and socialized risks — you are transferring many
private obligations onto the national ledger.”

According to a joint analysis by the Center on Budget and
Policy Priorities, the Committee for Economic Development and
the Concord Coalition, the projected U.S. budget deficit
between 2004 and 2013 could grow from $1.4 trillion to $5
trillion.

Einhorn explained further why he favored investing in gold
in the current economic and policy climate.

Last week, when Bernanke, Geithner and White House economic
adviser Larry Summers spoke in interviews and on panel
discussions, he said, “My instinct was to want to short the
dollar, but then I looked at other major currencies — euro,
yen and British pound — and they might be worse.”

“Picking these currencies is like choosing my favorite
dental procedure,” he said. “And I decided holding gold is
better than holding cash, especially now that both offer no
yield.”

THE WAY TO AVOID “TOO BIG TO FAIL”

Among structural issues that U.S. policymakers also need to
address is avoiding another disaster of Lehman proportions,
Einhorn said.

“The proper way to deal with too-big-to-fail or
too-interconnected-to fail is to make sure that no institution
is too bigger, interconnected to fail,” he said.

The test, he said, should be that no institution is ever so
individually important that if the U.S. were faced with its
demise that the government would be forced to intervene.

“The real solution is to break up anything that fails that
test,” he said.

“The lesson of Lehman should not be that the government
shouldn’t have prevented their failure; the lesson of Lehman
should be that Lehman should not have existed at a scale that
would have allowed it to jeopardize the financial system,” he
said. “And the same logic applies to AIG (AIG.N), Fannie,
Freddie, Bear Stearns, Citigroup (C.N) and probably a dozen of
others.”

Read more….

As a cheaper option for holding gold jewellery as an investment, Indian consumers are being sold small gold coins and bars through major marketing campaigns by the banks and even by India Post.

Read more….