Economic Outrage du Jour: Emails Exposed
Hugh Son at Bloomberg reports that e-mails forced into the light show that Treasury Secretary Timothy Geithner, as president of the Federal Reserve Bank of New York, parts of whose job is supposedly to be curtailing bankers’ riskiest impulses, told American International Group to conceal information about its payments to banks while the financial crisis was unfolding:
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. …
“It appears that the New York Fed deliberately pressured AIG to restrict and delay the disclosure of important information,” said Issa, a California Republican. Taxpayers “deserve full and complete disclosure under our nation’s securities laws, not the withholding of politically inconvenient information.”
You won’t hear any applause in this corner for the obstructionist, ultra-wealthy Darrell Issa. His self-funded recall petition encumbered us Californians with Arnold Schwarzenegger in the governorship, a position Issa himself hoped to capture. His support for English-Only laws, right-wing attacks on ACORN, dissing of the 9/11 widows and other antics since his self-funded campaign put him in Congress epitomize the politics progressives are duty-bound to grind into dust.
But, frankly, if the disclosures in those emails are what Bloomberg and Reuters and others are saying, congressional Democrats ought to be on top of this issue. Must we depend on the richest man in Congress to engage in an oligarch vs. oligarch battle to give us the skinny about what’s going on?
Edward Harrison at Credit Writedowns says, quite correctly:
At issue is whether the 100 cents on the dollar payments by AIG to its credit default swap counterparties were a backdoor bailout. Most market watchers believe that AIG counterparties would have received significantly less on the free market, exposing them to tens of billions in losses instead of taxpayers (see CW story from March 2009 on this issue). So, in a very real sense, many believe taxpayers were defrauded by the government’s handling of the AIG affair. This latest revelation only adds to that belief.
Moreover, 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. You have to see this in a negative light.
With the economy continuing to show signs of at least short-term improvement, many Democrats and some progressives in and out of the party, seem unwilling to second-guess what was done on the fly at the height of the financial crisis. And, with an election year already under way, there may be a tendency to stand publicly and firmly behind Geithner. Hoping for what? That even more damaging revelations don’t come to light before November? How much that was unknown when this was written might become known by then?
Next week, Chairman Phil Angelides will hold the first hearings of the Financial Crisis Inquiry Commission that was approved in May. Some people hope this will operate with the same spirit as the 1930s investigation that came to be known by the name of its last and toughest chairman, the Pecora Commission. If Tim Geithner’s name doesn’t come up a few times during those hearings, it will be a very big surprise.
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The emails are here. (h/t to fladem)