Maybe this information would have been better to have when the Senate mulled over the appointment of Tim Geithner as Treasury Secretary a year ago. It certainly puts new light on the official position of Democrats on outrageous outrage over the inner workings of both AIG and the bailout. When Geithner ran the New York Fed, that organization directed AIG to hide details of its use of bailout funds to pay off banks:
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.” President Barack Obama selected Geithner as Treasury secretary, a post he took last year.
Jim Geraghty offers a “Heckuva job, Timmy,” and notes that in a sane world, Geithner would be clearing out his desk after this revelation. In a sane administration, especially one that declared its devotion to openness, transparency, and honest government, a tax evader like Geithner wouldn’t have had the job in the first place.
Almost a year ago, Democrats hyperventilated over the machinations of AIG execs and screeched about their bonuses. Now it appears that the problem wasn’t AIG at all, but the sneaky way the New York Fed and Geithner rode to Goldman Sachs’ rescue, and that of other banks. Geithner and his cohorts wanted to make sure they covered their tracks while using AIG as both a whipping post and a money-laundering device in order to effect the rescue of politically-connected private institutions.
Should we have rescued GS and the banks? Opinions differ, but even if we needed to do so, that should have been done with enough transparency for everyone to understand where the money went and why. Playing shell games with the money while demonizing the people who were forced to run the laundry should have been a prescription for excluding Geithner from positions of authority — and so should have the tax evasion revelations. Instead, the administration of Hope and Change chose obfuscation and deceit.