Photoshop/CoC card set credit: Tennyson Hayes
Late last week, Bloomberg News reported that the New York Federal Reserve Bank — then under the leadership (or rather, lack of leadership) of Tim Geithner — presided over a systemic effort in the fall of 2008 to suppress public disclosure of ailing insurer AIG’s backdoor bailout payments to banks (I lambasted the corruptocrat NYFed/Geithner regime over the suppression on Fox & Friends last Thursday here):
The Federal Reserve Bank of New York, then led by Timothy Geithner, told American International Group Inc. to withhold details from the public about the bailed-out insurer’s payments to banks during the depths of the financial crisis, e-mails between the company and its regulator show. AIG said in a draft of a regulatory filing that the insurer paid banks, which included Goldman Sachs Group Inc. and Societe Generale SA, 100 cents on the dollar for credit-default swaps they bought from the firm. The New York Fed crossed out the reference, according to the e-mails, and AIG excluded the language when the filing was made public on Dec. 24, 2008. The e-mails were obtained by Representative Darrell Issa, ranking member of the House Oversight and Government Reform Committee.
The New York Fed took over negotiations between AIG and the banks in November 2008 as losses on the swaps, which were contracts tied to subprime home loans, threatened to swamp the insurer weeks after its taxpayer-funded rescue. The regulator decided that Goldman Sachs and more than a dozen banks would be fully repaid for $62.1 billion of the swaps, prompting lawmakers to call the AIG rescue a “backdoor bailout” of financial firms. “It appears that the New York Fed deliberately pressured AIG to restrict and delay the disclosure of important information,” said Issa, a California Republican. Taxpayers “deserve full and complete disclosure under our nation’s securities laws, not the withholding of politically inconvenient information.”
Treasury Secretary Geithner’s defense?
He says he had no clue.
Late Friday night, the NYFed sent a letter to GOP Rep. Darrell Issa of the House Committee on Oversight and Government Reform underscoring how in the dark Geithner was:
The ignorance card has worked well for the hapless tax cheat. It got him nominated and confirmed to his present position. And it’s saving his hide now. The White House and the Democrat majority are standing by Geithner.
Snap a picture of this Culture of Corruption group hug:
Treasury Secretary Timothy Geithner retains the confidence of President Barack Obama as he faces questions about why the Federal Reserve Bank of New York tried to withhold details of the government’s financial-industry rescue, administration officials said.
Aides to top congressional Democrats also said that Geithner has support on Capitol Hill as lawmakers prepare hearings into why the New York Fed in December 2008 asked American International Group Inc. to scale back disclosures of the government’s $182.3 billion bailout of the New York-based insurer. The Treasury Department said Geithner, 48, recused himself from such deliberations after Obama picked him to be Treasury chief the previous month.
But House Republicans are turning up the heat. Crank it higher:
Following the release of e-mails revealing the New York Federal Reserve’s apparent efforts to suppress disclosure to federal regulators of AIG bank payments during the financial crisis, the lead House Republican on the Joint Economic Committee is calling for a Joint Economic Hearing into the matter – with Treasury Secretary Tim Geithner as the lead witness.
In a letter to Democratic Chairwoman Carolyn Maloney of New York, U.S. Congressman Kevin Brady (R-TX) urges that Geithner testify before the committee and that Congress determine his “knowledge and complicity in the furtive efforts to discourage full disclosure to the SEC” of AIG payments to its banking counterparties.
“Given that Tim Geithner insisted on the sweetheart deals to the banks through AIG its not a stretch to believe he wanted them concealed, especially as he went through his vetting process in the Senate,” says Brady, who has called on the Treasury Secretary to resign for his failures as leader of economic recovery for the Obama Administration.
Brady says lawmakers should be concerned that this continues a pattern of lack of transparency by Geithner. The special inspector of the Troubled Asset Relief Program (TARP) has repeatedly criticized the Treasury Department for rejecting recommendations for more public transparency of TARP funds and for paying 100 cents on the dollar to AIG counterparties for nearly worthless credit-default swaps – a directive that cost taxpayers billions of dollars.
Democrat Rep. Edolphus Towns of N.Y. is also perking up his ears:
House Committee on Oversight and Government Reform Ranking Member Darrell Issa (R-CA) welcomed Committee Chairman Edolphus Towns’ (D-NY) interest in new questions raised by Issa’s investigation surrounding Tim Geithner and the Federal Reserve Bank of New York’s decision to pay billions of dollars to AIG counterparties.
“The week of January 18th, the Oversight Committee will hold a hearing in which Secretary Geithner and NYFRB General Counsel Thomas Baxter will be invited to appear,” Issa said. “Both Republicans and Democrats on this Committee have been waiting for more than a year to get answers from Secretary Geithner. The documents my investigation has produced show that AIG was pressured by the FRBNY to conceal information related to Mr. Geithner’s decision to pay billions of taxpayer dollars to counterparties of AIG’s credit default swaps – including Goldman Sachs, Société Générale, and Deutsche Bank – to retire the swaps at 100 cents on the dollar, instead of demanding any concessions from these firms. This decision was the subject of a report by the Special Inspector General for the Troubled Asset Relief Program (“SIGTARP”) and the source of much public outrage.”
Issa added, “Should Secretary Geithner or anyone else this Committee wants to hear from decline the invitation to appear, they should be subpoenaed.”
And Issa gets to the heart of the matter:
“In the case of Secretary Geithner, he was presiding over unprecedented taxpayer-funded bailouts that would have tremendous consequences for the incoming Administration. Are we really to believe that Geithner “played no role in, and had no knowledge of” the AIG counterparty deal and the New York Fed’s effort to prevent AIG from disclosing details of a deal that ended up costing taxpayers tens of billions of dollars? If true, Secretary Geithner is admitting that as an unprecedented effort to stabilize Wall Street and the financial services sector was underway, he recused himself, thereby raising new questions on his competency.
If he truly played no role at all in any of this, I wonder if Secretary Geithner shares Tom Baxter’s understanding that he shouldn’t be informed about a deal that involved tens of billions of taxpayer dollars? Does he agree with the NYFRB’s attempts to pressure AIG to withhold disclosure of the counterparty deal of their SEC filings? Shouldn’t the standard for someone in his position be to instruct his subordinates to inform him as much as possible?
Remember: By his own admission, as I reported in Culture of Corruption, Geithner called his oversight of the financial meltdown during his NYFed tenure “inadequate.” He fostered Citigroup’s spending binge and engineered its $52 billion federal bailout, helped structure the $30 billion Bear Stearns bailout, and twiddled his thumbs in the corner while his staff directed AIG to hide details of the bank swaps that cost taxpayers an extra $13 billion on top of the $182 billion in public bailout funds it eventually reaped.
If these Beltway creatures refuse to drain the swamp, voters must do it themselves.
As commenter Flyoverman said in a thread earlier this morning: “The only ethics committee with any clout is an informed electorate.”