Here’s a win for the press, namely The New York Times and Bloomberg.

The government, or one of its internal watchdogs anyway, the TARP Inspector General, looks at the AIG backdoor bailout of Wall Street (and France and Germany, etc.) that the two outlets have been writing about since way back last September.

You’ll not be surprised to find that the TARP IG says Tim Geithner rolled over for Wall Street here in his capacity as then-head of the New York Federal Reserve. One big bank, UBS, even offered to take a haircut, but wasn’t allowed to.

The stunner here, which the Journal has toward the bottom of its story:

Mr. Geithner told the inspector general that “the financial condition of the counterparties was not a relevant factor” in the government’s decision to effectively make the banks whole on their positions.

Say what? Does anyone believe that? The whole point of bailing out AIG was the financial condition of its counterparties. Nobody cared whether that one company lived or failed—they were concerned that its tumble would start a domino effect among its counterparties. The Journal should have fleshed this out some more, but at least it, unlike the other major papers, pointed it out.

This ought to be second-day-story number one. Folks, this is your Treasury Secretary saying that.

These two paragraphs in The New York Times contradict each other (emphasis mine):

The New York Fed, led then by Timothy F. Geithner, who is now the Treasury secretary, therefore had little leverage in the negotiations, according to a post-mortem of what has emerged as the most inflammatory episode in the rescue of A.I.G.

The Fed “refused to use its considerable leverage,” Neil M. Barofsky, the special inspector general for the Troubled Asset Relief Program, wrote in a report to be officially released on Tuesday, examining the much-criticized decision to make A.I.G.’s trading partners whole when people and businesses were taking painful losses in the financial markets.

Which is it? The Wall Street Journal says the report “faulted the New York Fed for not using its leverage as the regulator of some of these bank.” Let’s go with that, although the WSJ further down notes that the Fed “already had shown its hand” by bailing out AIG once, implying to the creditors that it wouldn’t let the insurer fail. Still, anytime the Fed really wants to have leverage on something, whatever it is, it can find a lever and a fulcrum. Bloomberg emphasizes the Fed made “limited efforts” to negotiate payments downward.

This is a good context paragraph by the WSJ:

The audit provides a window into a bailout effort that has been shrouded by a lack of disclosure and questions over why the U.S. government in effect funneled tens of billions of dollars to the U.S. and European banks that were AIG’s trading partners.

And this is nicely done by the Times, noting that IG Barofsky emphasized how differently the government treated the big banks than they did the automakers:

First, the Fed considered itself a creditor of A.I.G., rather than a regulator that could impose its will on banks. It approached A.I.G.’s trading partners with a request for “voluntary” concessions. Mr. Barofsky said this differed from the government’s role in the auto industry, where it lent the car makers money but also negotiated aggressively and won substantial concessions from other creditors.

The stories even have some French high-handedness, with its government saying concessions were illegal. And transparency is emphasized for the opaque Fed, which is something akin to telling Kim Jong Il—in English—he ought to open up North Korea:

Mr. Barofsky said the facts also undermined the Fed’s arguments that banking secrecy was an essential part of bank stability.

“The default position, whenever government funds are deployed in a crisis to support markets or institutions, should be that the public is entitled to know what is being done with government funds,” he said.

Let’s not forget, and most of the papers do here, that the Fed, incredibly, wouldn’t even tell taxpayers whom it had backdoor-bailed out. That didn’t come until several months later when Congress made one of its periodical arousals from slumber.

The Times and Goldman Sachs (an Audit funder) continue their battle over how much AIG losses would have affected it. The ref says, no surprise, that the Times is right: Goldman’s hedges wouldn’t have mattered much in the “market turbulence.”

The Washington Post reports that the counterparties got $62 billion.

A special shout out to Audit Interviewees Gretchen Morgenson and Mark Pittman of the NYT and Bloomberg, respectively, who were raking the muck on this story a year ago. Who knows if such a report would have been issued without them highlighting this issue.

UPDATE: See a follow-up post discussing Naked Capitalism’s criticism of the press coverage.

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Ryan Chittum is a former Wall Street Journal reporter, and deputy editor of The Audit, CJR's business section. If you see notable business journalism, give him a heads-up at rc2538@columbia.edu. Follow him on Twitter at @ryanchittum.