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By Jody Shenn, Bob Ivry and Alan Katz Jan. 27 (Bloomberg) — A French regulator was willing to discuss allowing lower payments to retire American International Group Inc. ’s obligations to the country’s banks, according to congressional testimony that undermines part of the rationale the Federal Reserve Bank of New York gave for paying full value. France’s regulator was “open to further negotiations” to discuss the possibility of concessions by AIG counterparties Societe Generale SA and Credit Agricole SA’s Calyon unit, in November 2008, Neil Barofsky , the special inspector general for the Treasury Department’s Troubled Asset Relief Program, said in prepared remarks for a House oversight committee hearing today. New York Fed General Counsel Thomas Baxter wrote to Barofsky last year that the regulator declined to demand concessions from U.S. banks partly because “it would not have been appropriate” when rivals in other nations were unwilling or “legally barred” from giving discounts. Baxter, Barofsky and Treasury Secretary Timothy F. Geithner , who was New York Fed president during the rescue, are scheduled to testify today before the House panel reviewing the $182.3 billion bailout. “It appears officials at the New York Fed deceived or even lied to the inspector general regarding the French regulator’s position,” said Joshua Rosner , managing director at Graham Fisher & Co., a New York investment research firm. Barofsky is investigating the extent of U.S. regulators’ cooperation with his office and whether the New York Fed improperly limited disclosures about the bailout, he said in his testimony. Andrew Williams , a spokesman for the Treasury Department, referred questions to the New York Fed. ‘Catastrophic Consequences’ AIG’s obligations had to be resolved quickly to avoid “catastrophic consequences” for the economy, Baxter said in prepared remarks for the hearing. “Taking additional time to press further for a discount was not justified.” In his remarks, Geithner said, “everyone should realize that because of the actions of the Treasury and the Federal Reserve, the American financial system is now in a position where it can provide the credit necessary for economic growth.” Geithner approved payments of $62.1 billion, or full value, to 16 AIG counterparties, including Goldman Sachs Group Inc. , in November 2008 to retire contracts in which the insurer promised to reimburse the banks for declines in mortgage-linked holdings, according to a Nov. 17, 2009, Barofsky report . The French banking regulator “forcefully asserted” that firms in the country couldn’t make concessions outside of an AIG bankruptcy, Barofsky said in that report. Prepared to Negotiate Barofsky learned subsequently that France’s Commission Bancaire was prepared to negotiate with the New York Fed, he said in today’s testimony. Previously the New York Fed told his office that the commission prohibited concessions, he said. “The French regulators noted that such negotiations would have been unprecedented, would have likely required universal agreement among counterparties to make concessions, and would have had to be conducted in a transparent manner and at a high level, but continued negotiations were possible,” Barofsky said. While the French regulators didn’t tell Barofsky what specific statements they made to New York Fed negotiators, they did say “they did not ‘slam the door’ to such continued discussions,” according to his testimony. Commission Bancaire spokeswoman Corinne Dromer declined to comment. Lawmakers have called the payments to the banks a “backdoor bailout.” Societe Generale received the most, $16.5 billion, including collateral posted by New York-based AIG and payments from Maiden Lane III, the vehicle backed by the New York Fed. Goldman Sachs got $14 billion, and Deutsche Bank AG, based in Frankfurt, got $8.5 billion. Calyon received $4.3 billion. ‘Lowest Quality Trades’ Societe Generale, France’s second-largest bank, expressed a willingness to retire its “lowest quality trades” with AIG before the New York Fed became involved in negotiations, according to a BlackRock Inc. presentation dated Nov. 5, 2008. The document, among 250,000 pages of records turned over to the House Oversight and Government Reform Committee, was prepared by the asset manager for AIG and later given to the New York Fed. Stephanie Carson-Parker , a spokeswoman for Societe Generale, declined to comment, as did Bertrand Hugonet of Calyon. UBS AG , Switzerland’s largest bank, was the only firm to volunteer to the New York Fed to accept less than full payment, according to the special inspector general’s report. The offer of a 2 percent haircut depended on other banks taking the same reduced payment, the report said. To contact the reporters on this story: Jody Shenn in New York at jshenn@bloomberg.net ; Bob Ivry in New York at bivry@bloomberg.net ; Alan Katz in Paris at akatz5@bloomberg.net .