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Marshall Huebner is a person Zero Hedge has great respect and admiration for. The Davis Polk lawyer, in addition to having an impressive work ethic with many successful bankruptcies under his belt (Delta's (DAL) 2007 emergence being a case in point: in fact, he will likely be making a repeat appearance there quite soon now that Goldman (GS) has envisioned another ramp to $200/barrel of crude), volunteers 13 hours every Sunday night as an Emergency Medical Technician - a noble dedication to his community.

Marshall's dedication however is not only to his immediate community, but to American taxpayers in general: a little known fact is that Davis Polk is the official yet still formally unannounced legal advisor for the Federal Reserve. And no other company has tested Marshall's mettle more than AIG, which has been on the verge of complete financial collapse on many occasions over the past year.

AIG's collapse of course has been ruled out as an option by both the current and prior administrations, both of which observed the market's reaction to Lehman's bankruptcy and realized that one more financial failure would be the end of civilization as we know it. Readers will recall that TARP was originally envisioned as a toxic security purchase program (comparable to what the latest version of TALF has become). It took Paulson, and subsequently Geithner, no time to make TARP and the ensuing alphabet soup of programs, merely a backstop for all financial companies whose foundations were shaken as a result of AIG's failure. In essence, the fate (and progression of troubles) of nationalized AIG is the one, most critical question mark, from which all subsequent policy decisions emanate.

What do Huebner and Davis Polk have to do with this? A few days ago, Fox Business published emails it has received as part of a FOIA request to the Federal Reserve. What the email (below) indicates is that not only was an AIG bankruptcy a viable option for the Fed, but that Marshall Huebner was in fact presenting to an extensive audience of Fed members on the merits (or lack thereof) of such.


This coincides perfectly with unconfirmed rumors swirling in late January that AIG had retained TBTF law firm Weil Gotshal to advise it in advance of a bankruptcy filing. Instead, the Fed, for some reason, flipped and decided not only not to file AIG, but to throw several tens of billions of extra dollars at it, which led to the March, Barney Frank/AIG witch hunts (which by the way have still to lead to even one public questioning of Joe Cassano).

Here is the issue - as the Fed has lately been spinning its transparency with and without the use of recently retained lobbyists, it is critical that all the documentation that was presented at this meeting, and all tangential materials, be made public immediately.

And this means not merely Huebner's presentations that had been put together as part of the above meeting (which as the e-mail indicates did take place, and there is undoubtedly information that the Davis Polk lawyer presented), but any discussion materials, memoranda and e-mails, between the Fed and all its legal and financial advisors: in this case, most notably, one Morgan Stanley (MS), which was the financial advisor in the AIG situation. And just so readers recall the incest that is going on between the Fed and its financial advisors, here are some of the firms engaged by the Fed in its ongoing efforts to vacuum any and every available security out there: in the Fed's $500 billion MBS program, retained financial companies are BlackRock Inc. (BLK), Pimco, Wellington Management Co. and... Goldman Sachs. In another program, it is JP Morgan (JPM) which is overseeing $540 billion in disbursements to money market mutual funds... and then there are the TALF advisors... and the list goes on and on.

At this point HR 1207 is a reality in Congress, and hopefully it may even pass the Senate, before the President likely vetoes the bill. It did, after all, take many months of demands and ultimately, a subpoena, to reveal the Fed's e-mails regarding Ken Lewis (BAC). Yet in the face of a crony government, proactive readers can again take action into their own hands. Pursuing the Fox initiative one step further, now that the parameters of the AIG disclosure needed are available, Zero Hedge believes it is in the public's best interest that the Fed disclose all documents prepared by Marshall Huebner, by Davis Polk and by Morgan Stanley with regard to the discussion that led to the conclusion to bail AIG out instead of letting it fail in early February.

Marshall Huebner advised Zero Hedge that he is "not at libery to chat" on the topic when queried about the issue. Yet it is critical to uncover just who had the most to gain from preventing AIG from failing, and just what were the considerations that were analyzed and resolved by Fed members before deciding to invest a total of over $180 billion in taxpayer capital in bailing out a company which is at this point terminally broken and any cash invested in it will never be recovered.

The link to submit a FOIA request to the Fed is here. With the government unable to safeguard its citizens' interests, it is the duty of citizens to do so (and hopefully vote out all in government who hinder such efforts).

Update: below is a presentation by Davis Polk from April of 2009 which provides a brief mention of the AIG bankruptcy issue in passing:

Slide 10: "Currently, there is no single uniform Federal law governing the restructuring or liquidation of diversified US financial groups such as AIG"
Slide 44: "AIG would be subject to 20 state solvency regimes -- current process would create systematic risk"

Also look at slide 5... How anyone can say there are green shoots when in reality $2.5 trillion has been spent (not pledged, SPENT) to stabilize the economy from full collapse is simply beyond comprehension.



hat tip Richard

Source: Asking the Fed: Let's See the Transcript of the AIG Bankruptcy Negotiations