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How Tim Geithner Screwed the American Taxpayer

Posted by Larry Doyle on January 7, 2010 9:31 AM |

Tim Geithner, then head of the New York Fed, blinked and screwed the American taxpayer out of billions of dollars in the process. How so?

Geithner and his cronies in Washington have misrepresented–if not outright lied–about the payments to both domestic and foreign banks in settling exposures to then failing AIG. While politicians and pundits alike will reference the precarious nature of the time and heat of the moment to defend Geithner and his cronies, the simple fact is the settlement of the AIG swaps at 100 cents on the dollar was nothing short of one of the greatest heists in our country’s history.

This heist transferred multiple billions of dollars from the American taxpayer to the likes of Goldman Sachs, JP Morgan, Societe Generale, and many more domestic and foreign banks as well.

At that very point, Wall Street knew it had Tim Geithner over a barrel and has owned him ever since.  As much as Geithner may try to play the populist card, the power brokers on Wall Street know all too well that at the point of the gun, Geithner blinked.

Who deserves credit for exposing this corner of the Wall Street-Washington incest? Rep. Darrell Issa (R-CA). As Bloomberg highlights this morning, Geithner’s New York Fed Told AIG to Limit Swaps Disclosure:

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.

Why couldn’t Geithner demand that Goldman take 60 cents on the dollar? Geithner admittedly knew the system needed funds and expediently transferred these funds at 100 cents on the dollar. That said, the precedent Geithner set proves that Wall Street has always and still now owns Washington. Lloyd Blankfein, who was in the room with Geithner and Paulson at the time, is a much better poker player and trader than Tim Geithner. Blankfein trumped Geithner at that point and at each and every hand since then.

America deserves so much better.

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LD

  • Patriot

    Seems fairly obvious now why Geithner is heading Treasury. Same thought process as to why Mary Schapiro is heading the SEC. What’s that?

    Keep your stories straight and make sure those holding all the sensitive material about the incest are on board.

    You’re right, LD. America definitely deserves better than a tax cheat heading Treasury. The hypocrisy of it all is amazing.

    • Let’s hope the set up isn’t to get rid of Geithner and replace him with the disaster of a two faced Senate Banking Committee head Chris Dodd.

      • Larry Doyle

        Brian,

        The Democrats and Obama specifically may have cut a deal with Dodd to bow out now. We should not be so naive to think that they would not screw Dodd and negate any deal. There is NO way the American public would ever stand for Chris Dodd being Secretary of the Treasury. At some point in the process Rahm would deliver that message and Dodd will know that he got bent over.

        Supposedly the same thing happened to John Kerry who had been promised the Secretary of State position in return for his endorsement of Barack.

        Dodd should be very familiar with the bending over concept because he has done that to the American public a lot over the years.

  • Mike

    Purchasing AIG’s assets at 100 cents on the dollar is the biggest atrocity I’ve heard of since the crisis began. I really think if the public understood exactly what that implied there would be a lot more outrage.

    I wonder how many people know that Paulson used to be CEO of G. Sachs. I believe there are in fact plenty of GS alumni in government positions.

  • Judy

    And why doesn’t the Mainstream media report this????

  • Randy

    The mainstream media doesn’t report stuff like this any more because the integrity of journalism was sold down the river long ago in the name of corporate profits. The government controls their licensing and large corporate interests are their owners and handlers.

    I don’t see that changing any time soon, if ever.

    • Larry Doyle

      While the mainstream media has lost almost all credibility I do detect a shift in tone. The story about Obama not broadcasting the healthcare debate on C-SPAN is getting a lot of press. Is the media now realizing it is losing the American public? Is America waking up?

      We can only hope.

    • j r

      The mainstream media in the US today is like Pravda was in the USSR, a mouthpiece for government propaganda. Today Pravda has more real honest news than any US mainstream media outlet.

  • Fed Up

    What’s the over-under as far as the date when Turbo-Timmy gets whacked by Barack?

    I think it is even money at best that he makes April 15th. Oh that’s Tax Day. How prophetic.

  • Randy

    Who does that leave us with? Jamie Dimon from Chase?

    • Larry Doyle

      I would think Dimon is the most likely candidate to replace Geithner.

      Certainly not Summers. Barack needs an individual who would command the respect of the market, our creditors, and the political establishment.

      • Aaron Kramer

        Umm, Jamie Dimon was on the board of the NY FED with Jeff Imelt and little Timmy. They are the architects of this entire scandal. If AIG went down JP would have followed because of CDO exposure related to those who would have collapsed from AIGs collapse. Goldman had AIG exposure, JP had exposure to entities that had similar positions to Goldman. Oh yeah and GE sold 350 billion in government backed bonds through the TALF. What a country!

        • Aaron Kramer

          I was incorrect when I stated GE issued 350 billion in new bonds backed by the government. The government provided a backstop for 350 billion in GE paper and GE issued 45 billion in new paper.

  • Randy

    I think the Obama “behind closed doors” negotiating (which is of course totally contrary to his campaign promises) is getting play in the media because so many disenfranchised politicians are squawking about it, but I have been wrong before.

  • GeeQ

    The Lehmann Bros “bankruptcy” cost $138B. The funds were sent from JPMorgan to Lehmann in two payments. These two payments were offset by Fed transfers to JPMorgan on the same days.Where was this communicated to the public? In the Bloomberg.com legal section(They had 2 reporters at the Manhattan bankruptcy court). And yet the automaker “bailout” for $4B received hundreds of hours of Primetime coverage. I will assume JPMorgan was cashing in on some form of derivatives obligation from Lehmann.
    No matter. Ay-rabs will get the blame eventually.

    • Larry Doyle

      Could very well have been. The fact is the industry was and to a large extent still is broke.

      If you have further color on this specific transfer of funds I’d welcome reviewing.

      Lehman was clearly sacrificed by Paulson after the heat he took for providing a lifeline, albeit a short one, to Bear Stearns.

      Thanks for the color.

  • WOW!! Just WOW!! This is the story of the year (already)!

    You will be interested in this, too: http://dailybail.com/home/how-the-ny-fed-under-stephen-friedman-tim-geithner-pressured.html

    (Links to more in comments section, including an article by Spitzer.)

  • Pingback: American Politicians ‘rescue’ the Economy |()

  • coe

    Let’s face it, the explosion (figuratively and sadly literally)in credit-default swaps was destined to happen…though unassailable as a valid product in concept, when the notional ballooned to multiples of multiples of the actual exposures outstanding, you knew the dam was going to burst someday. How and why the politicos deemed it critical to repay the AIG counterparties par for the good of the financial system is a study in hubris, insider dealing, and raw muscle. There is an old African saying that comes to mind, “When elephants fight, the grass gets trampled”…out of the flushing of Lehman, and Bear for that matter, sprouts the anomaly of AIG and TARP. Guess who are the blades of grass?!

  • Fed Up

    Coe,

    American public needs to install some of that new field turf.

  • Patriot

    Spencer Bachus (R-AL) and Elijah Cummings (D-MD)calling for Congressional inquiry into this heist.

    How often do we have inquiries but then nothing happens? All too often.

    Whatever truly happened from Madoff investigations?

    When was the last time somebody in Washington was actually fired?






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