U.S. Treasury Secretary Timothy Geithner said on Thursday the bailout of insurer American International Group was not meant to help out bank counterparties and that he had no role in the decision not to disclose payments made to banks.

In his first public comments since e-mails surfaced last week showing the New York Federal Reserve -- when Geithner was at the helm -- advised AIG not to disclose payments it made to banks after receiving a taxpayer bailout, he said the insurer was legally obligated to make the payments.

We had no effective legal means to step in and prevent default (at AIG) ... without helping this firm meet all its legal obligations, Geithner told CNBC television.

The e-mails, which showed lawyers for the New York Fed advising AIG not to disclose payments that gave 100 cents on the dollar to banks holding AIG credit default swaps, have touched off a firestorm of controversy.

House of Representatives Oversight Committee Chairman Edolphus Towns, who has called the payments a backdoor bailout, said Geithner would testify before his panel on January 27.

Towns issued a statement saying several other witnesses have been invited to testify at the hearing. They include Thomas Baxter, general counsel for the Federal Reserve Bank of New York; Elias Habayeb, former chief financial officer of AIG Financial Services Group and Neil Barofsky, special inspector general for the Troubled Asset Relief Program (TARP).

Towns said the hearing would examine the collapse and federal rescue of AIG, in particular the compensation of AIG credit default swap counterparties.

In an interview with National Public Radio, Geithner said the aid for AIG was not intended to help out big banks that held its credit default swaps.

If the government had not stepped in to act to prevent the failure of AIG, this crisis would have been much more damaging, he said.

The government rescued the failing insurer in September 2008 at a cost to taxpayers that has risen to $180 billion, a rescue that has infuriated the public and lawmakers alike.

Prodded by the panel's top Republican, California Representative Darrell Issa, the committee wants Geithner to answer questions about the New York Fed's role in the decision not to disclose the payments in filings with securities regulators.

After prompting from regulators, AIG did disclose that payments to some big banks were made at par. Geithner told CNBC that was the right thing to do.

Towns has also called for other New York Fed officials to testify, including the regional Fed bank's top lawyer, and has subpoenaed the New York Fed for information on the payments, including Geithner's e-mails, phone logs and meeting notes.

INQUIRY WIDENS

A second House panel on Thursday said it would also look into the matter.

We now have the time to put this back on the agenda, House Financial Services Committee Chairman Barney Frank said. The Massachusetts Democrat said, however, that Geithner's role in the bailout was overshadowed by the two men that outranked him, Fed Chairman Ben Bernanke and then-U.S. Treasury Secretary Henry Paulson.

News of Geithner's decision to testify came as a group of 25 House Republicans urged the Fed to grant them the same access as members of the Senate Banking Committee to documents detailing the government's rescue of AIG.

In a letter to Bernanke, the lawmakers said allegations the Fed sought to suppress information about counterparty payments are deeply troubling. Members of the Senate Banking Committee have been allowed to view documents relating to AIG at the Fed.

The controversy over the e-mails has put Geithner under intense scrutiny. The Obama administration has said Geithner had already recused himself from AIG-related matters because he had already been nominated to be Treasury secretary, a point Geithner stressed on Thursday.

I had no involvement in that basic decision because ... my appointment to this job had been announced, he told NPR.

Asked by CNBC whether he had ever considered resigning, Geithner said: That's a judgment the president has to make. As long as I have a chance to help him ... fix these problems, I'll be honored to do it.

The White House has repeatedly said Geithner enjoys the president's support.

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