Ironic that it's taken a Republican to get the ball rolling on financial industry accountability

[depakid]

Let's hope the Democrats have the good sense to run with it- and run over the Melissa Beans of the world.

Tip of the Iceberg
by Eliot Spitzer, William K. Black & Frank Partnoy

In a December New York Times op-ed, we called for the full public release of AIG email messages, internal accounting documents and financial models generated in the last decade. Today, a Bloomberg story revealed that under Timothy Geithner's leadership, the Federal Reserve Bank of New York told AIG to withhold details from the public about its payments to banks during the crisis. This information was discovered when emails between the company and the Fed were requested by representative Darrell Issa, ranking member of the House Oversight and Government Reform Committee.

The emails requested by Issa span five months beginning in November 2008. If five months of emails reveal information key to our understanding of the aftermath of the crisis, imagine what 10 years of emails could contribute to our understanding of its causes. We believe the AIG emails and other internal company documents are the 'black box' of the financial crisis. If we understand the failure of AIG, we will more fully understand the crisis -- what caused it and more importantly how to prevent it from happening again.

The emails today detail the efforts of the Fed to suppress the disclosure of payments made to banks such as Goldman, Sachs Group for reimbursement of their credit-default swap exposure. When the Treasury Department stepped in, AIG had at least $440 billion in credit-default swaps outstanding.

The Fed, led by Tim Geithner, paid Goldman, Sachs Group and other banks 100 cents on the dollar for these instruments rather than negotiating a lower rate closer to the actual value, (estimated by some to have been as little as 20 cents). In testimony to the Congressional Oversight Panel, Tim Geithner insisted it was necessary to make these payments in full, arguing that even a small downward negotiation would prove catastrophic to the financial sector.

Elizabeth Warren, head of the oversight panel has repeatedly challenged repeatedly this assertion.

Regardless the size of the payments, the Fed's request to suppress both their amount and the parties to whole these payments were made would not have come to light without the release of these emails. Without the rest of the emails, we will be unlikely to fully understand what led to the collapse of AIG and the financial markets. If we can't understand it, we will be unable to prevent it from happening again.

More: http://www.huffingtonpost.com/eliot-spitzer/tip-of-the-iceberg_b_415495.html

[gateley]

1. Somebody on MSNBC was talking about this -- Ed Schultz? Shuster? I wonder

if this will force Geithner to "retire to spend more time with his family"? I hate that his appointment will look bad for Obama/Dems, but I really want him out of there. Get Obama on the phone for me, I'll let him know. :7

ETA -- And good on Spitzer!

[FrenchieCat]

2. Yes Amazing!

What I find amazing is the eagerness of those to hop on the Republican bandwaggon.....

along for the ride provided by douchebag Darrell Issa, the richest Congressman in the House,
who organize the Recall against Davis in California.

Smells to me....but of course, if it is about boogeyman Geithner, it must be true....
no need to even read the article. I trust you and old Issa!
might as well just bring some fresh rope, so that we can ready the
lynching of Geithner, Emanuel, and the President.

I'll wait for more facts, before I'll off anyone, considering the knee jerks
that live for this kind of stuff, day in, day out.

[depakid]

3. It's not a "Republican" bandwagon- it's about widespread malfeasance

And the article is penned by actual reformers who've prosecuted it repeatedly in the past.

In Black's case- he was a senior regulator who mopped up after the S & L debacle. You know- where lots of people were actually held accountable for their behavior and had to cough up ill gotten gains.

While less well known, Frank Partnoy's credentials on the matter are even more impressive. You see- he's another one of those who "got it right" (a quality which seems to have made a lot of people persona non grata in the administration).

Years before the current economic crisis, law professor and former Wall Street trader Frank Partnoy was warning about the dangers of risky financial practices.

In his 1997 book FIASCO: Blood in the Water on Wall Street, Partnoy detailed how derivatives — financial instruments whose value is determined by another security — were being used and abused by big financial firms. Partnoy used his experiences as a derivatives trader at Morgan Stanley to give the book an insider's perspective. In the preface to FIASCO, Partnoy wrote about the growing influence of derivatives:

"Derivatives have become the largest market in the world. The size of the derivatives market, estimated at $55 trillion in 1996, is double the value of all U.S. stocks and more than 10 times the entire U.S. national debt. Meanwhile, derivatives losses continue to multiply."

Partnoy is a professor at the University of San Diego law school. In addition to FIASCO, he's the author of Infectious Greed: How Deceit and Risk Corrupted the Financial Markets.

Listen to the NPR interview- and read an excerpt from the book here: http://www.npr.org/templates/story/story.php?storyId=102325715

[dionysus]

4. you noticed that too... yesterday ppl were going to the mat for michael steele over the private

school non-issue...

[LooseWilly]

5. Darrel Issa is such an incredibly Republican Republican... if the Democrats lean more corporatist...

I think we'll officially be in Bizarro World.

The first step is when the likes of Eliot Spitzer show themselves champions of integrity. Then the likes of Issa stand up for the public... mmm, crazy pills. :+