Tag Archives: Henry Paulson

Geithner Accused Of Incompetence Over His Role In AIG Bailout

The US treasury secretary Timothy Geithner was accused of incompetence, obfuscation and of making “lame excuses” during a furious hearing on Capitol Hill over the government’s contentious bailout of the sprawling insurer AIG.

In an unusually ill-tempered confrontation, members of Congress from both parties rounded on Geithner over a decision to use taxpayers’ money to pay out the full $62bn owed by AIG to banks such as Goldman SachsMerrill LynchBarclays and RBS. Geithner described the AIG bailout, which cost a total of $182bn, as a “tragic choice” at the height of the global financial crisis in September 2008 but said that at the time, there was a risk of “utter collapse” of the US economy.

“For the first time in 80 years, the United States risked a complete collapse of our financial system,” said Geithner. “Americans were starting to question the safety of their money in the nation’s banks, and a growing sense of panic was producing the classic signs of a generalised run.”

Several members of the House oversight committee demanded Geithner’s resignation, accusing him of selling US taxpayers short by failing to force AIG‘s counterparties to take “haircuts”.

“It stinks to high heaven, what happened here,” said Stephen Lynch, a ­Democratic congressman. “I don’t like the obfuscation.”

The committee’s chairman, Edolphus Towns, a fellow Democrat, blasted the government’s handling of AIG: “Taxpayers were propping up the hollow shell of AIG by stuffing it with money, and the rest of Wall Street looted the corpse.”

At the time of the bail-out, Geithner was chairman of the New York Federal Reserve, which played a key role in rescuing AIG. He said the alternative to refunding AIG’s counterparties would have been bankruptcy of AIG, causing an evaporation of confidence leading to “millions more job losses”, factory closures and a possible economic “catastrophe”.

And he denied being part of a “cover-up” in which the government initially hid the identity of the banks receiving AIG funds, saying he withdrew from participating in decisions from late 2008 in preparation for taking office in the Obama administration.

But a Republican, John Mica, accused Geithner of providing “lame excuses” and said: “You were either incompetent in your job or you were not doing your job.”

The biggest counterparty receiving money from AIG was Goldman Sachs. Visibly rattled, Geithner was obliged to confirm to the committee that his chief of staff, Mark Patterson, is a former Goldman Sachs banker, as is Geithner’s predecessor at the treasury, Henry Paulson. But he angrily defended those involved, describing them as “people of enormous integrity and experience, operating under exceptional circumstances with no precedent”.

During the hearing, Geithner was pressed over his views on Wall Street pay. He described the growth of bankers’ bonuses at the height of the boom as a “terrible catastrophe”.

“It came amid a wave of a huge increase in income inequality in the US over decades,” said Geithner. “In the financial industry, it was much worse and helped encourage a level of risk-taking that brought the financial system to the edge of collapse.”

http://www.guardian.co.uk/business/2010/jan/27/aig-bailout-timothy-geithner

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Secret Banking Cabal Emerges From AIG Shadows

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Treasury Secretary’s Secret Talking Points Reveal That Banks Were Forced to Surrender Ownership Stakes to Government

Last October, then-Treasury Secretary Henry Paulson ordered nine banks that the Treasury Department described as “healthy” financial institutions to surrender ownership interests to the government or else face regulatory action that would force them to surrender ownership interests to the government, according to an internal Treasury Department document.

Paulson’s extraordinary threat culminated in one of the most sweeping government intrusions into the free-enterprise system in the history of the United States.

Judicial Watch, a nonpartisan watchdog organization, used the Freedom of Information Act to obtain a copy of the internal Treasury Department “talking points” that were prepared for Paulson to use at his Oct. 13, 2008 meeting with the chief executive officers (CEOs) of the nine banks.

At the meeting–to which the bankers were called at short notice–Paulson made a conspicuous display of potential government regulatory power.

Paulson was flanked by Federal Reserve Chairman Ben Bernanke; current Treasury Secretary Timothy Geithner (who was then president of the Federal Reserve Bank of New York); Federal Deposit Insurance Corporation (FDIC) Chairman Sheila Bair and Comptroller of the Currency John C. Dugan.

While none of these regulators have responded to inquiries by CNSNews.com, the talking points mention each by first name.

The Fed, the FDIC and the Office of the Comptroller of the Currency all regulate various elements of the U.S. banking industry.

“Ben, Sheila, John, Tim and I have asked you here this afternoon because we are of the view that the United States needs to take strong and decisive action to arrest the stress in the financial system,” Paulson’s talking points directed him to tell the assembled bankers.

The talking points indicate that Paulson then told the nine bank CEOs that the government was going to use $250 billion of the $700 billion approved by Congress to shore up the financial industry through the “Troubled Asset Relief Program” (TARP) to buy stock in banks all across the country and that the nine banks these CEOs represented had no choice but to allow the government to buy their stock–or else.

Paulson assured the CEOs that the government would inform the public that the banks were “healthy institutions, participating in order to support the U.S. economy.”

In other words, according to the treasury secretary’s confidential talking points, the nine banks were not failing financial institutions that had come to the federal government in desperate need of a bailout from the taxpayers to stay in business.

Instead, they were healthy institutions that were being compelled to surrender ownership stakes to the government in order to help the government carry out a government policy.

To read the rest of this article go to http://www.cnsnews.com/public/content/article.aspx?RsrcID=49004

Geithner, Paulson Named In $200 Billion Lawsuit

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