An AIG cover-up?
Our Treasury Secretary has some explaining to do. Bloomberg has uncovered emails from last fall when Tim Geithner was head of the Federal Reserve Bank of New York. In those emails, the NY Fed suggested AIG keep quiet about the insurance company’s repayments to banks like Goldman Sachs.
This is regarding credit default swaps that banks purchased from AIG. I’m sure you’ll recall the furor that banks were getting 100% of their money returned, after the massive bailout of AIG. According to Bloomberg, that’s what Geithner didn’t want the public to know:
The e-mails span five months starting in November 2008 and include requests from the New York Fed to withhold documents and delay disclosures… According to (AIG attorney Kathleen) Shannon’s e-mails obtained by (Congressman Darrell) Issa, the New York Fed suggested that AIG refrain in a filing from mentioning so-called synthetic collateralized debt obligations, which bundled derivative contracts rather than actual loans.
The filing “reflects your client’s desire that there be no mention of the synthetics in connection with this transaction,” Shannon wrote to Davis Polk on Dec. 2, 2008. “They will not be mentioned at all.”
But here’s how New York Fed spokesman Jack Gutt characterized the emails:
Gutt said it was appropriate for the New York Fed, as party to deals outlined in the filings, “to provide comments on a number of issues, including disclosures, with the understanding that the final decision rested with AIG’s securities counsel.”
At Credit Writedowns, Edward Harrison has this interpretation:
… in regards to Tim Geithner personally, this revelation is extremely damaging. Not only did he, Paulson and Bernanke mishandle the Lehman bankruptcy which triggered the panic central to the financial crisis, but he has now been personally implicated in withholding – covering up, if you will – vital evidence on the looting of taxpayers to the benefit of financial companies, some of whom are not even domestic institutions…
Tim Geithner must go.
Another take from New York Magazine:
But what were then-New York Fed President Tim Geithner and his colleagues supposed to do? They didn’t have any leverage. They were just the government, and these were big important banks (that they might want to work for someday)! And so, via e-mail, they instructed AIG to tone down certain details of the transaction in their regulatory filing. So, you know, people didn’t overreact…
Of course, now that these e-mail exchanges have been made public by Representative Darrell Issa, it all looks so much worse.
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