Putting different pieces of testimony from yesterday’s hearings before the House Committee on Oversight and Government Reform, it’s easy to see how the New York Federal Reserve’s “backdoor bailout” of Goldman Sachs and other large banks, via insurance giant AIG, became such a convoluted mess–nobody knew anything about it. Least of all the people who were allegedly in charge– Larry, Moe, and Curly former Treasury Secretary Hank Paulson, Fed chairman Ben Bernanke, and then head of the New York Fed and present Treasury Secretary Timothy Geithner.
“Henry Paulson, who was Treasury secretary at the time, told the House of Representatives Oversight and Governmental Affairs Committee that he had no role in the negotiations that settled the banks’ insurance-like contracts, called credit default swaps, with AIG for 100 cents on the dollar..”
Geithner: “I had no role in making decisions regarding what to disclose about the specific financial terms.. and payments to AIG’s counterparties.” To which Rep. Dan Burton replied:
“U.S. Federal Reserve Chairman Ben Bernanke said on Wednesday he was not directly involved in negotiations with the counterparties of insurance giant AIG, having delegated the duties to the New York Fed.”
“It stretches credulity for us to believe that you had no role in this and didn’t know anything about it when your attorneys and people that worked for you were sending emails all around the place and you were the head of the Fed and you didn’t know anything about it. It just doesn’t make any sense to me and I think a lot of my colleagues feel the same way.”
One thing is clear, though. Despite the Three Stooges being completely in the dark, Government Goldman Sachs made out like bandits in the entire sordid affair. I’m sure it’s strictly coincidental that:
“Paulson is an ex-Goldman chief executive, Geithner’s chief of staff previously worked for Goldman, and Dan Jester, a Treasury point man in the AIG bailout, is a Goldman alum.”
That surely had nothing to do with this:
“An unredacted document obtained by the Huffington Post list the damage in detail. Goldman Sachs alone, for instance, got $14 billion in government money for assets worth $6 billion at the time — a de facto $8 billion subsidy, courtesy of taxpayers.”
But yet Geithner testified yesterday that, “In the end, the prices paid for the securities were their fair market value.” Fair to who, Tim?
Geithner also testified that time was of the essence in bailing out AIG, that there was no time to negotiate terms which might be more favorable to the Fed. But yet:
“Neil Barofsky, the special inspector general tracking the use of taxpayer bailout funds…disclosed this week that he’s opened investigations into the Fed’s candor about the matter, recalled that Paulson, Bernanke and Geithner leaned weeks earlier on failing investment bank Bear Stearns to accept $2 a share to turn over its assets to banking goliath J.P. Morgan Chase.”
I guess there aren’t enough Bear Stearns friends in high places.