Tim Geithner, then head of the New York Fed, blinked and screwed the American taxpayer out of billions of dollars in the process. How so?
Geithner and his cronies in Washington have misrepresented–if not outright lied–about the payments to both domestic and foreign banks in settling exposures to then failing AIG. While politicians and pundits alike will reference the precarious nature of the time and heat of the moment to defend Geithner and his cronies, the simple fact is the settlement of the AIG swaps at 100 cents on the dollar was nothing short of one of the greatest heists in our country’s history.
This heist transferred multiple billions of dollars from the American taxpayer to the likes of Goldman Sachs, JP Morgan, Societe Generale, and many more domestic and foreign banks as well.
At that very point, Wall Street knew it had Tim Geithner over a barrel and has owned him ever since. As much as Geithner may try to play the populist card, the power brokers on Wall Street know all too well that at the point of the gun, Geithner blinked.
Who deserves credit for exposing this corner of the Wall Street-Washington incest? Rep. Darrell Issa (R-CA). As Bloomberg highlights this morning, Geithner’s New York Fed Told AIG to Limit Swaps Disclosure:
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.
Why couldn’t Geithner demand that Goldman take 60 cents on the dollar? Geithner admittedly knew the system needed funds and expediently transferred these funds at 100 cents on the dollar. That said, the precedent Geithner set proves that Wall Street has always and still now owns Washington. Lloyd Blankfein, who was in the room with Geithner and Paulson at the time, is a much better poker player and trader than Tim Geithner. Blankfein trumped Geithner at that point and at each and every hand since then.
America deserves so much better.