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Geithner and the AIG Emails: Scandal Is Only Tip of the Iceberg - Magda Hassan - 08-01-2010
Geithner and the AIG Emails: Scandal Is Only Tip of the Iceberg
By Eliot Spitzer and William K. Black and Frank Partnoy, NewDeal 2.0. Posted January 7, 2010.
Now we learn that Geithner told AIG to withhold details from the public about the billions it handed to banks during the crisis.
In a December New York Times op-ed, we called for the full public release of AIG email messages, internal accounting documents and financial models generated in the last decade. This Thursday, a Bloomberg story revealed that under Timothy Geithner's leadership, the Federal Reserve Bank of New York told AIG to withhold details from the public about its payments to banks during the crisis. This information was discovered when emails between the company and the Fed were requested by representative Darrell Issa, ranking member of the House Oversight and Government Reform Committee.
The emails requested by Issa span five months beginning in November 2008. If five months of emails reveal information key to our understanding of the aftermath of the crisis, imagine what 10 years of emails could contribute to our understanding of its causes. We believe the AIG emails and other internal company documents are the 'black box' of the financial crisis. If we understand the failure of AIG, we will more fully understand the crisis -- what caused it and more importantly how to prevent it from happening again.
The emails today detail the efforts of the Fed to suppress the disclosure of payments made to banks such as Goldman, Sachs Group for reimbursement of their credit-default swap exposure. When the Treasury Department stepped in, AIG had at least $440 billion in credit-default swaps outstanding. The Fed, led by Tim Geithner, paid Goldman, Sachs Group and other banks 100 cents on the dollar for these instruments rather than negotiating a lower rate closer to the actual value, (estimated by some to have been as little as 20 cents). In testimony to the Congressional Oversight Panel, Tim Geithner insisted it was necessary to make these payments in full, arguing that even a small downward negotiation would prove catastrophic to the financial sector. Elizabeth Warren, head of the oversight panel has repeatedly challenged repeatedly this assertion.
Regardless the size of the payments, the Fed's request to suppress both their amount and the parties to whole these payments were made would not have come to light without the release of these emails. Without the rest of the emails, we will be unlikely to fully understand what led to the collapse of AIG and the financial markets. If we can't understand it, we will be unable to prevent it from happening again.
As such, today we are renewing our request for the full public disclosure of all AIG documents. We believe the government should put these documents on-line, thereby establishing an open-source investigation that would allow journalists and citizens the opportunity to piece together the story of what happened at AIG and in so doing more fully understand what happened in the broader financial collapse. AIG -- and more specifically its credit-default swaps exposure -- was an important contributing factor to the crash of the financial markets. What sets this company apart from others that played a role in the crisis is that we, the taxpayers, own it. As we noted in our original piece, US taxpayers bought 80% of AIG when they bailed the company out with $180 billion last year. As owners of the company, taxpayers are also owners of AIG. As owners of the company we can demand the release of these documents.
The taxpayer's stake in AIG is held by the A.I.G. Credit Facility Trust, whose three trustees are Jill M. Considine, a former chairman of the Depository Trust Company and a former director of the Federal Reserve Bank of New York; Chester B. Feldberg, a former New York Fed official who was chairman of Barclays Americas from 2000 to 2008; and Douglas L. Foshee, chief executive of the El Paso Corporation and chairman of the Houston branch of the Federal Reserve Bank of Dallas. We call on these three officials (interestingly all former Fed officials) to immediately release the documents we request.
The value of these documents, if it were ever in doubt, was certainly proved by Thursdays's revelations.
Release the emails.
Geithner and the AIG Emails: Scandal Is Only Tip of the Iceberg - Nathaniel Heidenheimer - 31-01-2010
Rather interesting background bio on Geithner given in new book To Big To Fail by NYT UperInsider and 476AD muckraker "Andrew Ross Sorkin":
That directness was the product of a childhood spent constantly adapting
to new people and new circumstances. Geithner had had a n army brat
childhood, moving from country to country as his father, Peter Geithner,
a specialist in international development, took on a series of wide-ranging
assignments, first for the United States Agency For International Dvelop-
ment and then for the Ford Foundation. By the time Tim was in high
school, he had lived in Rhodesia (now Zimbabwe), India, and Thailand.
The Geithner family was steeped in public service [s:egg:
hakehands:t:adore:ee:flowers:p:reddy:ed I:dancing2:musicus:a:vroamy! N.H.]his mothers father, Charles Moore, was a speechwriter and adviser to
President Eisenhower, while his uncle, Jonathan Moore, worked in the
State Department.
.... After College, Geithner attended the Johns Hopkins School of
Advanced International Studies, where he graduated with a master's
degree in 1985... With the help of a recommendation from the dean o
of Johns Hopkins, Geithner landed a job at Henry Kissinger's consulting
researching a book for Kissinger and making a very favorable
impression on the former secretary of State.....
... with Kissinger's support, he then joined the Treasury Department
and became and assistant financial attache at the U.S. Embassy in
Tokyo, where he ruled the compound's tennis courts with his fierce
competitiveness. The courts were also a place he could hold informal
discussions with Tokyo correspondents from major publications,
diplomats, and his Japanese counterparts.
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SAIS at Hopkins was never a leader in the CIA Off Campus Movement, on account of it violated their affirmative actions.