Audit Faults New York Fed in A.I.G. Bailout

[Frank Booth]

Source: New York Times

The Federal Reserve Bank of New York gave up much of its power in high-pressure negotiations with the American International Group’s trading partners last year, according to a government report made public on Monday.

Just two days before the New York Fed paid A.I.G.’s partners 100 cents on the dollar to tear up their contracts with the insurance giant, one bank volunteered to take a modest haircut — but it never got the chance.

UBS, of Switzerland, alone offered to give a break to the New York Fed in the negotiations last November over how to keep A.I.G. from toppling and taking other banks down with it. It would have accepted 98 cents on the dollar.

But UBS’s good-faith gesture was quickly drowned out by Goldman Sachs and the top French bank regulator. They argued, with others, that it would be improper and perhaps even criminal to force A.I.G.’s trading partners to bear losses outside of bankruptcy court.

The banks and the regulator were confident that the New York Fed was not willing to push A.I.G. into bankruptcy, because earlier in the fall the New York Fed had stepped in with $85 billion to prop up the insurer.

The New York Fed, led then by Timothy F. Geithner, who is now the Treasury secretary, therefore had little leverage in the negotiations, according to a post-mortem of what has emerged as the most inflammatory episode in the rescue of A.I.G.

Read more: http://www.nytimes.com/2009/11/17/business/17aig.html?_...

---

So someone who's already proven he's either corrupt, stupid, or easily pushed around (or a combination of the three) gets appointed Treasury Secretary? I just don't get it.

[Name removed]

1. Deleted message

Message removed by moderator. Click here to review the message board rules.

[Frank Booth]

2. I'm perfectly fine with decades-long incarceration.

I'd like to add Lloyd Blankfein to the list though.

[chill_wind]

3. Some more Geithner stuff

From my journals last January- February.

Why Did Citi Get Bailout Money Meant For ‘Healthy’ Banks?

US Levin To Subpoena Treasury TARP Contract With Citibank

"They have not given the actual contract although they promised it," said Levin. "Well, I'm going to subpoena it. I'm going to subpoena a document that I shouldn't have to."

How Citigroup Unraveled Under Geithner's Watch

http://www.democraticunderground.com/discuss/duboard.ph...



Jeff Gerth, ProPublica. January 15, 2009.

Obama's pick for Treasury Secretary has some serious strikes against him -- especially when it comes to regulation.

alternet: http://www.alternet.org/workplace/119871/how_citigroup_...

Stuff a lot of us weren't supposed to be discussing or calling undue attention to so early in the admin, was the eventual hostile message. Like the vetters didn't know his past performance or the little tax problem he had etc etc.

[Toucano]

17. Kick

Still news.

[change_notfinetuning]

4. Caving is the new negotiating. n/t

[chill_wind]

5. And the brutally bad news just keeps coming for the guy:

Geithner Singled Out In TARP Watchdog Neil Barofsky's Scathing Report On AIG Bailout


First Posted: 11-16-09 09:36 PM | Updated: 11-17-09 01:50 AM


A brutal report issued Monday by a government watchdog holds Timothy Geithner -- then the head of the Federal Reserve Bank of New York and now the nation's Treasury Secretary -- responsible for overpayments that put billions of extra tax dollars in the coffers of major Wall Street firms, most notably Goldman Sachs.

The authoritative new narrative describes how, while bailing out insurance giant AIG last fall, a team led by Geithner failed nearly every step of the way.

Instead of bargaining with AIG's numerous counterparties to resolve its billions of dollars in souring derivatives contracts, Geithner's team ended up paying top dollar for toxic assets -- "an amount far above their market value at the time," the report notes.

"There is no question that the effect of FRBNY's decisions -- indeed, the very design of the federal assistance to AIG -- was that tens of billions of dollars of Government money was funneled inexorably and directly to AIG's counterparties," the Office of the Special Inspector General for the Troubled Asset Relief Program said.

the rest: http://www.huffingtonpost.com/2009/11/16/aig-bailout-go...

Show him the door, President Obama. NOW.

[DallasNE]

8. Not So Fast

Could this possibly be a little CYA by TARP folks here? Tarp is what Bernanke and Paulson cooked up togather. I smell a little deflection going on here. What directive did Bernanke give to the New York branch of the Fed. This looks terribly self-serving to me.

[chill_wind]

6. He tried to stonewall Elijah Cummings and the few in Congress who

gave a damn, too.

Members Of Congress Want AIG Counterparty Investigation by TARP IG
Posted by chill_wind in Economy
Fri Mar 27th 2009, 10:39 PM

Members Of Congress Want AIG Counterparty Investigation
Arthur Delaney

March 26, 2009 12:48 PM

Twenty-seven members of Congress, led by Rep. Elijah Cummings (D-Md.), signed a letter asking TARP watchdog Neil Barofsky to investigate the matter of AIG's counterparties -- firms to whom AIG paid off outstanding debts using TARP funds. AIG paid the full amount of its debt to other banks at home and abroad without seeking a partial settlement first.

The text of the letter:



March 25, 2009


The Honorable Neil M. Barofsky

Office of the Special Inspector General for the

Troubled Assets Relief Program

1500 Pennsylvania Avenue, NW, Suite 1064

Washington, DC 20220

Dear Inspector General Barofsky:


After reviewing the documents released by American International Group, Inc. ("AIG") regarding the identity of counterparties to certain transactions who received taxpayer "bailout funds," we find that they raised more questions than they answered.

Congress and the American people were told that the AIG bailout was necessary to limit systemic risk across the global economy. Using bailout funds, AIG in turn paid various debts to the counterparties to its various transactions. Apparently, all claims were paid at 100 percent of face value, including swap-related claims.

We would like to know if assessments were made of the health and total exposure risks of counterparties, such as Goldman Sachs (which, for example, claimed it had no material exposure to AIG), Barclays, Deutsche Bank and others. If such assessments were made, by whom were they made and what were the criteria guiding the assessments?

Further, was any attempt made to renegotiate and close out these contracts with "haircuts?" If not, why not? What was the benefit of the decision to pay 100 percent of face value to the American taxpayers who provided the bailout funds and how did it support the goal of ensuring the stability of the economic system?

In essence, we would like to know if the AIG counterparty payments, as made, were in the best interests of the taxpayers who provided the funding and in the best interests of re-establishing long-term economic stability.

SIGTARP was created to investigate the uses of TARP funding, and AIG is among the largest recipients of TARP funding, and the largest recipient of government aid during the crisis. We believe that an investigation into the AIG counterparty payments is a critical component of the oversight effort. As the holder of nearly 80% of the equity in AIG, the U.S. government has a fiduciary obligation to manage this investment in a prudent manner, and your role is crucial to the protection of the taxpayers' rights as AIG's "shareholders." We look forward to your response to the above questions.

Sincerely,

Elijah E. Cummings, et al.

Rep Cummings had written to both the Fed and Treasury in late January with questions about AIG and by March, Geithner had still not responded.

I'll have to see if I can find the other 27 who signed on and pressed for this investigation. They deserve a lot of appreciation.

[pjt7]

7. Geithner needs to be booted

EOM.

[chimpymustgo]

9. Here's the gang of workind at and frequently visiting the WH:

Compiled by a WaPo reader (for some reason, evil Larry Summers is ommitted):

-edit-
NAuchi wrote:

Despite overwhelming public fear and loathing of the wall street outfits, Obama and his team continue to consult with and employ numerous alumnae of wall street firms:

Lloyd Blankfein CEO of Goldam Sachs has visited the WH 3 times in 2009. The WH has placed many "former" GS operatives in the Obama administration.

Top Goldman Sachs alums in the WH:

Gary Gensler Commodity Futures Trading Board
Mark Patterson Chief of Staff to Geithner
Michael Paese Barney Frank's top aid
WH ecom advisor Gene Sperling received (900k from GS in 2008)
Neel Kashkari The Tarp Guy from Hell(carryover from GS alum Paulson)
Adam Storch--GS VP enforcement division of SEC

Vikram Pandit of Citigroup has visited the WH 3 times. His Tarp recipient Citibank just announced massive credit card rate hike to 22.9% now effective 1-1-10 and 25% for "cash advances". Citibank has also been inventing new service fees on an almost daily basis. This is done to pay for the deadbeats, and crooks the idiots at Citi extended credit to. Rewarding failure yet again.
11/17/2009 3:24:20 AM

http://www.washingtonpost.com/wp-dyn/content/article/20...

[chill_wind]

10. ...

[No Elephants]

11. I don't get it, either. Then again, I didn't get Bernanke's re-appointment, either.

[optimator]

12. ALL BY DESIGN

This is all theater, scripted, planned, and this incompetency angle is to protect the system.
They would even (pretend to) throw Geithner overboard to protect the system.
Its not like he would ever be punished for playing his part.
He will be rewarded.

[dixiegrrrrl]

13. Not enough people "get" that, sadly.

Welcome....

[TexasObserver]

14. Recommend

[TexasObserver]

15. Recommend

[chill_wind]

16. Front page story on the NYT, Page 24 coverage

in the Washington Post. Imagine that.

Dean Baker:
http://www.prospect.org/csnc/blogs/beat_the_press_archi...