Yesterday, the Federal Reserve Bank of New York announced the formation of a new Special Investments Management Group to assist with overseeing the FRBNY’s governance and risk management "in light of the tremendous expansion of the Bank’s balance sheet over the past eighteen months." The new Group will, among other things, manage the FRBNY's credit extension to American International Group (AIG), and its Maiden Lane LLC portfolios (created in connection with the rescues of Bear Stearns and AIG), and will be headed by Sarah J. Dahlgren, who has been the senior vice president in charge of the FRBNY's relationship with AIG since September 2008.

The formation of the FRBNY's new Group follows the FRBNY's and the Federal Reserve Board's invitation to the General Accounting Office (GAO) to audit the handling of the AIG bailout. In particular, yesterday, House Oversight and Government Reform Committee Chairman Edolphus Towns (D-NY) and Rep. Elijah Cummings (D-MD) jointly requested the General Accounting Office to undertake a "full review" of the FRBNY's assistance to AIG, including, among other things, who at the FRBNY made certain decisions on payment to counterparties of credit default swaps, disclosure of such counterparties, and the decision not to let AIG file for bankruptcy. Chairman Towns also recently issued a subpoena to the FRBNY for documents relating to payments made to AIG counterparties, and will hold a hearing on January 27 to examine the "collapse and federal rescue of AIG, in particular the compensation of AIG credit default swap counterparties."