David Sirota: After Helping Gordon Gekko Evade the SEC, Will Geithner Finally Now Be Fired?

[OhioChick]

Thu Jan 07, 2010 at 16:29

NOTE: I was going to post this tomorrow, but since the scandal is moving at light speed, I wanted to posted it right now as a follow on to Chris's rightfully enraged post, because the history of what's going on really explains how significant this story is. - D

Way back in May of 2009, I and others here at OpenLeft said President Obama needed to fire Treasury Secretary Tim Geithner because he was either lying or incompetent when it came to AIG. Per the norm, we were lambasted as part of the supposed fringe for saying this, just as we were lambasted for saying that the no-strings-attached bailout was a blatant giveaway to Wall Street. Now, while I'm not going to say "I told you so," I will note it's become more acceptable to say Geithner must be fired - especially after a new report that Geithner's New York Fed instructed AIG to refuse to disclose to SEC regulators some of the worst financial shenanigans surrounding the AIG bailout.

As I'll show using characters from the movie Wall Street, this kind of thing makes Gordon Gekko and Bud Fox's shenanigans look petty.

David Sirota :: After Helping Gordon Gekko Evade the SEC, Will Geithner Finally Now Be Fired?
For some history, the New York Fed, headed by Tim Geithner, bailed out AIG and then had the company famously pay back its creditors at 100 cents on the dollar. These creditors were huge banks that were taking big risky bets on mortgage-backed securities, and then buying "insurance" from AIG (more on this concept of "insurance" in a second) on potential losses on those bets. When the mortgage-backed securities lost their value in the housing bubble collapse and they called in their insurance, AIG was about to go under, until the New York Fed swept in.

If AIG had gone into bankruptcy like a normal corporation would have, there's little chance its creditors would have been paid back at 100 cents on the dollar. A bankruptcy judge or AIG shareholders/executives would have negotiated a much lower reimbursement rate. But because it was taxpayer money on the line, and because politically influential banks like Goldman Sachs can influence the government officials who made those reimbursement decisions*, AIG paid them in full with our taxpayer dollars. Put another way, the decision to pay back AIG's creditors in full with taxpayer cash was a massive giveaway/sweetheart deal to the big banks.

More: http://www.openleft.com/diary/16834/geithners-fed-told-aig-to-hide-sweetheart-deals-from-sec-thus-i-repeat-geithner-must-be-fired

[Demeter]

1. From Your Lips to God's Ears

and I DON'T mean Blankfein.

[ihavenobias]

2. Sadly, no. n/t

[depakid]

3. "we were lambasted as part of the supposed fringe"

A recurring story over the past 18 years among those of us who value policy over party- or politicians.

And "we told you so's" are poor solace for the destructive consequences involved.

[shadesofgray]

4. Obama will not even go after repug war criminals...so he most certainly will not

go after his corrupt buddy.

[FlyByNight]

5. Timmy dismissed?

I would be pleasantly shocked if this would occur.

However, real accountability within the Beltway is practically non-existent, especially for the Wall St. and/or MIC-friendly sets. It seems that the worse one fucks up, the more unaccountable one becomes.

[Hawkowl]

6. Obama's doom

If Obama doesn't fire Geithner, his presidency is finished. Oh, technically his term isn't over till 2012, but his presidency will have contracted terminal cancer.