Geithner: We Did What Was Necessary To Prevent 'A Second Great Depression'
Tim Geithener testified yesterday morning in front of the House Committee on Oversight and Government Reform, and I still don't know why we should give Geithner the benefit of the doubt. We shouldn't question him because we don't know how much worse it would be if he hadn't done all these things, right?
WASHINGTON — In heated questioning that at times took on the air of a cross-examination, Treasury Secretary Timothy F. Geithner on Wednesday defended his role and the government’s actions in bailing out the American International Group, saying Washington did what was necessary to prevent “a second Great Depression.”
But Mr. Geithner, who led the New York Federal Reserve Bank at the time, said he was not involved in the decision not to release information about deals that sent billions of taxpayer dollars from the bailout of A.I.G., the insurance giant, to big banks.
“I withdrew from monetary policy decisions,” Mr. Geithner said, “and day-to-day management of the New York Fed.”
The committee called Mr. Geithner, former Treasury Secretary Henry M. Paulson Jr. and other officials to explain, once again, the confounding results of an $85 billion rescue loan made to A.I.G. in September 2008. The loan sheltered big banks from any losses, but saddled A.I.G. with a debt so crushing that the Treasury soon had to step in and provide even more rescue money.
The questions aimed at Mr. Geithner focused almost immediately on his role in the A.I.G. bailout and why those negotiating on behalf of the taxpayers did not push the banks to make concessions, like returning the collateral to A.I.G. or accepting less than full value for their contracts with the insurer.
Throughout the morning, Mr. Geithner tried to persuade lawmakers that the government acted “in the best interests of the American people,” and not in the interests of big banks, in particular, as many lawmakers asserted, Goldman Sachs. Mr. Geithner, while keeping his composure throughout the questions, was forceful in his defense.
“I think the commitment to Goldman Sachs trumped the responsibility that our officials had to the American people,” Representative Stephen F. Lynch, Democrat of Massachusetts, told Mr. Geithner. His voice rising, his finger pointed at Mr. Geithner, Mr. Lynch expressed his frustration at the financial bailouts, and the bonuses now being paid by banks. “It stinks to the high heavens what happened here,” Mr. Lynch said. “I don’t like the obfuscation. And to top it all off, the disclosure was not there.”
In his comments, Mr. Geithner called for better controls on risk-taking by large financial institutions, and pointed out that more than a year after the near-collapse of A.I.G., the government still had no systems in place to cope with such failures. At times, the hearing took on a scolding, even berating, tone. One lawmaker, Representative John L. Mica, Republican of Florida, called upon Mr. Geithner to resign.
“I believe either you made a bad decision there, or there was the attempt to cover up one of the biggest bailouts, backdoor bailouts, in history,” Mr. Mica said. “Now, you’ve tried to frame it as you did it in the interest of the people and the failure of the system, I’m telling you, these are lame excuses. You were in the charge and did the wrong thing, or participated in the wrong thing.”
He added: “You give lame excuses then, and you’re giving lame excuses now.”
“Why shouldn’t we ask for your resignation as secretary of the Treasury?” Mr. Mica asked.
Mr. Geithner, who kept his composure, responded: “That is your right, to that opinion. I have worked in public service all my life. I have never been a politician.” (Later, Representative Michael Turner, Republican of Ohio, told Mr. Geithner: “I want to assure you from your answers today that you are absolutely a politician.”)Representative Dennis J. Kucinich, Democrat of Ohio, excoriated the New York Fed’s decision to pay 100 cents on the dollar to A.I.G.’s counterparties, including $2.5 billion to Goldman Sachs.
“Isn’t it true that the New York Fed gave Goldman Sachs a better deal than it could have ever expected from A.I.G. or any other market player?” Mr. Kucinich asked.
Mr. Geithner replied: “Under the laws of the land, we did not have the ability. So we faced a very simple choice: Let A.I.G. default, or prevent it. And there was no way — financial, legal or otherwise — we could have imposed haircuts, selectively default on any of those institutions, without the risk of downgrade and default.”
Mr. Kucinich scoffed at the answer. “If that doesn’t illustrate what the New York Fed was working for — or who it was working for — I don’t know what it does,” he retorted.
Mr. Geithner added that the negotiating position of A.I.G. was weak. With the ability to threaten default or allow A.I.G. to restructure in bankruptcy, negotiators were not in a position to make banks to take less on their contracts.
Both left and right are crawling towards the truth. Unfortunately, they're also playing the childish... blame game! I guess that's politics?
They questioned Tim and ran out of time, as Paulson was next... the right wanted more time with Tim and the left said... we gotta stay on schedule.
The childish bickering is slowing down the process, like usual. The answers are there... as long as they don't seal them away for 10, 15 or 20 years. :-/
Study the symptoms not the virus...
The senate just got the ball rolling to plunge us $2 trillion deeper into the abyss of debt.
Democratic-controlled Senate approves $1.9T increase in federal borrowing limit
http://www.startribune.com/politics/national/...
$14 trillion SOLD! Can I get a $16 trillion, $16 trillion, $16 trillion, going once...
Goodnight, Frau Blücher
If wrong, what happens when something can't be paid back?
If right, we'll find out the errors of our ways... I guess in both circumstances... we'll find out the errors of our ways?
The challenges in life, seems to always have been uncertain. The problem I see, is the strange instance of us as a species, not working together for our combined prosperity. I could go on and on pondering what's going to happen... and I do. One thing I've often thought of... what happens when somthing... anything... stops growing? When I'm wrong I hope people don't hate me, even though I'm not aware of anybody that's been correct 100% of the time. It's interesting, how we don't all work together and find it more attractive, to place blame.
I think everybody is right until the facts prove otherwise... at least substantially. I don't think it's simply "Democratic-controlled Senate approves $1.9T increase in federal borrowing limit" it has much more influence then that, though I understand you may have just cut-N-pasted? I believe you have a meritorious opinion, but if you think it does not matter... what is your vision looking forward? If ya could share your view...
Do you think we'll all be using chop-sticks one day... not that there is anything wrong with that ;)
Study the symptoms not the virus...
We have yet to pay off Vietnam, or the gulf war, or anything else of significance in the last 30 years for that matter. Every time the debt ceiling has been is raised the government has breached and expanded it.
Even Clinton's surplus while praiseworthy was little more than political brownie points. Each years deficit is added to the national debt, so for a brief moment in time our national debt edged downward from $5 trillion but that was it. On and up after that thanks to GWB.
Yes I cut and pasted the link but the reason the heading said "Democratic-controlled Senate approves $1.9T increase in federal borrowing limit" was because it took 60 Democrats votes to pass it. Both parties though are responsible for this calamity over the years.
We won't cut government spending like we need to, instead we will be forced to capitulate by necessity. By time our politicians pull their heads out of their ass it will be way too late. It makes me sad.
Goodnight, Frau Blücher
Geithner is bold face liar. Although that questioning he lied from the parts about censoring info to the cents on a dollar the banks were willing to take. This man purposely used the fed to help these bankers make a killing. Then when it fell through he keep them from having to pay for there risk taking by diverting tax payer money into these bank in secret. Geithner should be behind bars taking a fluid injection from big bubba.
not BOLD. Sorry if this is picky.
Joan of Oak
we will never know how bad it could have been or how much better we could have done. Certainly I'm not saying Geithner is near anywhere perfect, but hind sight is always 20-20. Him suggesting congress pass financial reform laws shows at least he's not for the old Wall Street ways.
I am not a crook
Lisa Simpson would call this specious thinking:
Homer: The Bear Patrol seems to be working!
Lisa: How do you figure that, dad?
Homer: Well you don't see any bears around, do you?
Lisa: Well that's fairly specious thinking.
Homer: Thank you, Honey.
Lisa: By the very same token, I could claim this rock repels tigers.
Homer: Really? How does it work?
Lisa: It doesn't! But you don't see any tigers around here, do you?
Homer: I'd like to buy your rock.
Diabolus est Deus Inversus
panels cost us?
"House Committee on Oversight and Government Reform" right sure it is uh huh.
Just another Wall Street weasel.
"Anyone that makes less than $150K in this country, has no business voting Republican."
Washington and London are seeing that the effort to gradually unwind speculative bubbles, provide the liquidity, and create jobs is failing. In fact, the planet’s economy is continuing to deteriorate.
That means we're doing well.
We only get action (like throwing TRILLIONS of dollars at incompetent institutions) when they are in a death spiral.
Of course, the action has nothing to do with ending the spiral, it just makes us feel good. The good will is like a gently uplift of our wings...so we can sooooar at lowered altitudes and continue on with our meager little existences.
"Anyone that makes less than $150K in this country, has no business voting Republican."
Ponzi Scheme: The Federal Reserve Bought Approximately 80 Percent Of U.S. Treasury Securities Issued In 2009
Putting politics aside, from the OCC to the FDIC... A.D.D. works well in some situations, keepin people busy.
We need Elizabeth Warren
Study the symptoms not the virus...
Were going to need more then that to get out of this hole
The problem is that everybody in government wants to politicize the situation and play the blame game by pointing fingers so their party stays in power.
I'm not quite as cynical though. Zoloft? I know... big pharma... ;)
Study the symptoms not the virus...
LOL maybe that's why Reid and others were nodding off during Barry's lecture last night!
Maybe it isn't?
Study the symptoms not the virus...
What a joke
why you, and many, may feel that way. Have you given up and or have some good ideas on how to improve our plight?
Study the symptoms not the virus...
Troth our plight?
Diabolus est Deus Inversus
It's tough work being on your kneess all day.
"Anyone that makes less than $150K in this country, has no business voting Republican."
Just ask Jamadi.
Diabolus est Deus Inversus
I've had since voting Democrat in the last two election cycles, Obama's appointment of this guy is in the top five for sure.
At the time (Nov. 2008), economists on both sides praised the appointment of Geithner.Seen as one of the best people possible for avoiding a complete fiscal meltdown and bringing stability back to the whole financial sector. If you opposed his appointment back then, I do wonder why. I think what you're doing is concentrating on the last 9 months of so, and probably didn't even follow closely what Geithner was doing in his first couple of months at the Treasury.
Or else, you are among those who would have taken the Republican tact and just let the financial system go belly-up.
Our economic policy is the same as Cheney's pre-emptive war & torture policy.
We prevented terrorist attacks with the latter, of course.
Fuckin' voodoo rituals. Why don't you just shake a gris-gris and wave a headless chicken around the room, Timmy?
Timmy is only the tribal chieftain. Bernanke is the witch doctor, so he is in charge of the headless chicken department.
"Anyone that makes less than $150K in this country, has no business voting Republican."
The AIG situation is very complicated.
Yves Smith (nom de plume) at Naked Capitalism is doing some of the best work in tracking and dissecting what should be a major scandal.
here
A good piece, there is much more.
Suffice it to say for me, there is very little credibility at the Treasury, the Fed, the Banksters (the use of the term itself displays bias) or at head of the excecutive.
It is a hoot that the Republicans can come in with a straight face and claim new found populism, after years of being joined at one side of the hip of the financial predators.
But the Democrats were joined at the other side of the hip.
statusquObama, change you can only pretend in
"FP" was their baby... sorta! ;)
Amended: I'm gonna go read that now Chomsky, ThanX
Tishman, BlackRock to Hand Stuyvesant Town Ownership to Lenders
More confirmation of the “Fed as chump” theory comes via its reliance solely on BlackRock for advice on the CDOs, particularly once it had set up Maiden Lane III (and recall BlackRock is also managing Maiden Lane I, the Bear bailout entity, and Maiden Lane II, which was created to deal with AIG’s securities lending mess).
These "BlackRock" peeps caught my eye the other day. Reviewing that NY housing complex failure and an AIG story on Hufblow. I asked if BlackRock realty was the same as BlackRock Inc. and the site scrapped my question.
I think they are related, I've heard they own some good property in the big apple? I'm just a theorist though. ;-/
Study the symptoms not the virus...
And I specifically single out the NY Fed Reserve branch as culpable.
A case can be made for "crony capitalism" at work, with the NY Fed, SEC, AIG, Goldman Sachs, Bear Sterns, and Moody's in collusion. My take on the whole scheme is:
-
(1) roll back legislative limitations,
-
(2) strip regulatory agencies of personnel and funding,
-
(3) pedal toxic derivatives to the max, everywhere,
-
(4) short your own toxic investment products - CYA,
-
(5) contrived economic collapse - make case for bailout,
-
(6) use bailout funds to make cronies "whole" (100 cents on dollar),
-
(7) use remaining bailout to make private "insider" profits,
-
(8) use extraordinary profits to justify big salaries & bonuses,
-
(9) when economy stagnates, make the case for a new round of bailouts,
-
(10) return to step (6) and repeat ...
Conclusion: The economic collapse was contrived; Thousands of Billions of USD$ have been diverted to cronies and co-conspirators for private profit at Taxpayer expense; Large quantity of TARP fund "side-profits" diverted back into the pockets of Washington politicians. Very little of the TARP funds actually made their way to the benefit of Main Street, the real impetus for job creation.
Prove me wrong -- audit the Federal Reserve, and thoroughly investigate relationship between SEC, Moodys, and the Wall Street Mobsters ...
"Those who make peaceful revolution impossible will make violent revolution inevitable."
-- John F. Kennedy
In capitalism, wealth is invested and if done wisely and luckily, the investor gets rewarded. If done foolishly and unluckily, the investor loses some or all of the investment. In workouts, where losing outcomes get to be negotiated instead of suffered, the investor "takes a haircut." In this case, a 15-20% haircut would have been appropriate. It would have re-affirmed the principle of loss being what disciplines capital markets. Making AIG's clients whole gamed the system and ripped off the taxpayers.
These shrugging denials from the guys who should have been working for the system and the people makes me throw up in my mouth a little. Our Secretary of the Treasury is a cuif.
The person who defines Reality wins.
n/t
"Those who make peaceful revolution impossible will make violent revolution inevitable."
-- John F. Kennedy
Reforming the root cause makes this drama unnecessary. 41 is not a Senate majority and fuck anyone who thinks it is.
Quis custodiet ipsos custodes? - Juvenal
Paulson & Geithner STOLE taxpayer money to pay off the AIG counterparties (including Goldman, where they were both execs!)...and a "Progressive President" has Half of that Bandit Team still Calling The Shots?
i completely agree with geithner: something had to be done, the govt had to inject a massive amount of money to keep the sucker from going down. basic econ understanding. BUT, the question was not whether or not to inject the money, the question was where to 'spend' the money. that, to me, is the real issue. and, thanks to the paulsons and geithners of the political elite, the money ended up being funneled to those that created this crisis (then ended up profiting from it).
this, like the debate over the climate crisis, is played skillfully by those that will stop at nothing to assure the status quo goes on unchallenged by annoyances such as democracy.
.. and let him retire to "spend more time with his family" ..
Democracy is too important to be entrusted to politicians.
Rise Up!
Protest!
can they think paying customers of AIG 100 cents on the dollar for crappy decision-making, using taxpayer money, is good for taxpayers.
The only firm allowed to go bankrupt was Lehman Bros. Frankly, we would have been better off letting a few more of these horseshit banks either go bankrupt or lose everything.
I agree we can't survive a "run on the banks", but this could have been dealt with through other means besides keeping people like Goldman Sachs 100% profitable.
This exposes our economy for what it really is, a house of cards. Our "money" really isn't there, other than a group of electrons on a hard drive. I doubt 5% of us could "cash out" without causing a complete meltdown.
Fiat monetary systems do have a place in the world, but if not properly regulated they are dangerous. Over-leveraging is great for bank and hedge fund profits, but extremely risky for the rest of us. With 30% of our GDP being comprised by the "financial services" industry, we are indeed in a fragile state.
out 30% of the economy seems to have "saved us." One of the arguments against HCR is that it's a "socialized government takeover" of 16% of the economy.
So which one is it, guys?
For me and many others, it wasn't the "doing it" that was the problem, it was the fact that it was done with no retraints and almost no requirements on the part of the recipients. Yes, ity had to be done. No, it didn't have to be done Paulson's (and Tim's) way.
Representative Paul Kanjorski (D-PA) appeared on C-Span on January 27, 2009 and told an astonishing story of how the financial crisis started. The bottom line, according to Kanjorski, is that on September 18, 2008 at 11 a.m. some $550 billion dollars disappeared from America’s money market accounts - all within a one to two hour time frame.
I believe he corrected himself a few days later and claimed that it was four billion dollars over several days. Which one was it? Either is troubling in its own way.
Remember this... De la Villehuchet was one of several money managers and investors left reeling in the wake of Madoff's alleged $50 billion Ponzi scheme,
I would of liked to have had, some of his insights. He had to know some of the AIG-[FP] peeps?
Gerry Pasciucco, a managing director at Morgan Stanley, who was not involved with AIG FP when it made its catastrophic bets, was selected to manage the unwinding of the portfolio in October 2008, after the company had effectively failed and been taken over by the Federal Reserve.
“Most of the business was written here appropriately,” --Gerry Pasciucco
On September 17, 2008, the British evening-news analysis program Newsnight reported that Morgan Stanley was facing difficulties after a 42% slide in its share price.
---------------------------------------------------------------------------
On September 22, 2008, the last two major unregulated investment banks in the US, Morgan Stanley and Goldman Sachs, both announced that they would become traditional bank holding companies regulated by the Federal Reserve,
That Tarp $$$ looked good to them I bet ;)
Study the symptoms not the virus...
The day before the money grab is posted about above...
Having read two seminal books on the "meltdown", "House Of Cards" and "Too Big To Fail", I think all this
grandstanding against the AIG bailout, and Geithner, has more to do about politics than reality.
Geithner was appointed SecTreas precisely to combat the perceived, and real, fiscal crisis. What he did at the Fed and later, in the first 2-3 months as SecTreas is perfectly defensible. And Geithner did a good job in my opinion at explaining how and why, under incredible pressure and an under-staffed
department (and, lest we forget, attacks from both sides from Day one).
In those hearings, which I watched, the real out of touch individuals were a handful of Reps on both sides.
Now, my problems with Geithner are "post-crisis". His Wall Street focus is not what we need in an administration that has shifted from stabilizing the financial sector to trying to address the "Main Street" isssues. I won't quibble on policy per se, but will say that in his persona he isn't the right guy to represent any policies that are populist.
I understand Obama's probable reluctance to ditch Geithner, at least so soon (although O'Neil was dumped within a year by Bush).
"Representative John L. Mica, Republican of Florida, called upon Mr. Geithner to resign.
'...
"'Why shouldn’t we ask for your resignation as secretary of the Treasury?' Mr. Mica asked."
What astonishes me was that it was a REPUBLICAN -- NOT A DEMOCRAT -- that asked the question immediately above.
When we encountered incompetence first-hand in the person of "Brownie" after Hurricane Katrina, everyone screamed for "Brownie's" scalp, and rightfully so. But are the rules different now with the Democrats in charge? Is incompetence acceptable when it is demonstrated by an appointee of a Democratic president? It shouldn't be.
Quite interestingly, the only Democrat quoted as pursuing the line of questioning shown in the transcript above was Dennis Kucinich, who has a reputation for independent thought. As a rule, I do not follow financial matters, but this transcript does jog me into wondering exactly what Geithner and the Obama administration are trying to pull.
Please detail how Geithner was incompetent in his handling (to the extent he was a player) in the AIG bailout. Please refute any of the facts related to that period. Because that's what this story is about.
And John Mica's grandstanding, which Geithner rather well refuted, is predicated on hot air and not on facts. Since Mica can't answer the question I've posed to you either.
My quarrel isn't with those who think for whatever reason Geithner has served his purpose; it's with those that deliberately obfuscate the reality of the situation.
You're right. He wasn't incompetent. He's a financial genius and was a Fed President who used his power to effectively extend illegal "insurance" money...public money...to a private institution under the guise of "protecting the banks".
That's not incompetence. It's a con game.
"Anyone that makes less than $150K in this country, has no business voting Republican."
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