On Geithner, the Republicans are really going to be disappointed

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Thu Jan-07-10 04:47 PM
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On Geithner, the Republicans are really going to be disappointed

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.”

‘Officially Recused’

Geithner was “officially recused from matters dealing with specific companies” at the New York Fed after his nomination for Treasury Secretary on Nov. 24, 2008, and “began to insulate himself weeks earlier in anticipation of his nomination,” said Meg Reilly, a Treasury spokeswoman. Geithner, who was tapped by President Barack Obama, took the Treasury job January, 2009. Mark Herr, a spokesman for New York-based AIG, declined to comment.

Issa requested the e-mails from AIG Chief Executive Officer Robert Benmosche in October after Bloomberg News reported that the New York Fed ordered the crippled insurer not to negotiate for discounts in settling the swaps. The decision to pay the banks in full may have cost AIG, and thus taxpayers, at least $13 billion, based on the discount the insurer was seeking.

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This is the RW yanking people's chains again. The fact that Geithner recused himself was mentioned many times during his hearing.

Frank Says Fed’s Role in AIG Is ‘Troubling,’ Supports Hearings

January 07, 2010

By Alison Vekshin and Peter Cook

Jan. 7 (Bloomberg) -- Representative Barney Frank said the Federal Reserve Bank of New York’s decision to tell American International Group Inc. to limit disclosures on payments to banks is “troubling” and said he supported holding congressional hearings on the issue.

The U.S. House of Representatives last month approved legislation that would prevent the Fed from having the power to bail out companies such as AIG in the future, Frank said today in a Bloomberg Television interview.

“The whole power that the Fed used in that case is gone,” said Frank, a Massachusetts Democrat and chairman of the House Financial Services Committee.

AIG, the New York-based insurer, submitted to the New York Fed a draft of a regulatory filing showing it paid banks, including 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 and AIG dropped the language in a December 2008 filing, e-mails between the company and the regulator show. The e-mails were obtained by Representative Darrell Issa, the top Republican on the House Oversight and Government Reform Committee.

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Still, there couldn't be a better time for an investigation, which may help to strengthen rgualatory reform and expose the real criminals.

Get it done.