Grassley's questions for the record center around the nominee's work as an independent consultant appointed by the Justice Department and the SEC to monitor activities at AIG following major fraud settlements in 2004 and 2006. He continued this role as independent consultant at AIG in the years leading up to the financial crisis and the taxpayer bailout of AIG.
Grassley said that during his time monitoring AIG, it appears Cole issued several best practices documents regarding compliance with SEC rules and regulations. While the documents related to Cole's work have not been made public by the Department of Justice, one document purported to be part of his work as an independent consultant specifically outlined best practices on derivative transactions. In the document, it appears that the nominee recommended establishing a derivatives committee to review derivative contracts entered into by AIG, but the recommendation expressly exempted derivative transactions entered into by the AIG financial products corporation, the subsidiary responsible for the 2008 meltdown at AIG that led to a $180 billion taxpayer bailout of AIG. Instead, the recommendation said derivatives entered by AIG Financial Products would be independently reviewed by AIG Financial Products itself
"It looks to me like Mr. Cole let the fox guard the hen house. He's been nominated for a very important position at the Justice Department, and I want to know why he allowed such an exemption as an independent monitor," Grassley said.
Grassley is also questioning Mr. Cole about allegations that he may have allowed AIG executives to amend, modify or review the reports before they were submitted to the SEC and the Justice Department, which raises questions about how independent his monitoring was.
Grassley has conducted some of the most aggressive oversight of the government's implementation of the financial bailout, including executive compensation, severance payouts, and documentation of how taxpayer dollars have been used.