We have been told repeatedly that current U.S. Treasury Secretary Timothy Geithner recused himself from all discussions about the New York Branch of the Federal Reserve bailing out AIG with Federal Taxpayer Money. At the time, Mr. Geithner was the head of the Federal Reserve Branch in New York and he had just been nominated to become the new Treasury Secretary.
EMails and other documents have recently been released by the New York Fed to the House Oversight and Government Reform Committee in response to a subpoena. The discovery apparently shows that Mr. Geithner made the final decision to bail out AIG in the way in which AIG was bailed. Specifically, it was Mr. Geithner who decided to make AIG's trading partners "whole" by paying them 100 cents on the Dollar on AIG's Credit Default Swaps and other securitized obligations which amounted to unregulated Credit Insurance issued by AIG. At the time, AIG's CDS's and similar securities contracts "were being settled at heavy discounts in other deals where the government was not involved." See Louise Story and Gretchen Morgenson, "A Rift at the Fed Over the Bailout of A.I.G." p. B1, col. 2 (New York Times Nat'l ed., "Business Day" Section, Saturday, January 23, 2010). See also Hugh Son, "Fed E-Mail to Geithner Cites Bank Benefit From AIG (Update 1)" (Bloomberg.com, Monday, January 25, 2010).
It is of interest to note another report that "on the day of the bailout of American International Group Inc.," Mr. Geithner's telephone logs show that he spoke with Warren Buffett of Berkshire Hathaway, Jamie Dimon of JP Morgan Chase, and Lloyd Blankfein of Goldman Sachs. Hugh Son and Jamie McGee, "Geithner Spoke to Buffett, Blankfein on AIG Aid Day (Update 2)" (Bloomberg.com, Friday, January 22, 2009).
It is also worth noting that, while there were others unknown--unknown at least partly because Mr. Geithner decided to keep their identities a secret, it is known that Goldman Sachs was one of the partners of AIG which received 100 cents of every dollar insured under the securities contracts issued to it by AIG.
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