Friday, January 29, 2010

Geithner Lie on Recusal in AIG Case Exposed

January 29, 2010 (LPAC)—During his testimony at the hearing of the House Oversight and Government Reform yesterday, Timothy Geithner lied that he had nothing to do with the New York Federal Reserve Bank decision to allow AIG to pay several banks, including Goldman Sachs, 100% of par on credit default swaps.

In the hearing, Rep. Marcy Kaptur (D-Ohio) pressed Geithner to prove that he had recused himself from decisions with regard to AIG: "Can you provide for the record a copy of the recusal agreement that you signed when you were at the New York Fed?" Geithner answered: "I did not sign a recusal agreement. I withdrew from day-to-day management, operations, policies of the New York Fed, and my colleagues both in Washington and in New York can attest to that. This was very important to do."

However, during the same hearing, Neil M. Barofsky, Special Inspector General of the TARP bailout program, testified to the following in his statement to the committee: "On November 7th, 2008, FRBNY employees involved with the negotiations reported to then-FRBNY President Geithner on the efforts to convince AIG counterparties to accept haircuts on their claims against AIG in return for unwinding the CDS contracts. Noting both the willingness of UBS to negotiate a small haircut and the generally negative reactions from the other counterparties, these FRBNY offials recommended that FRBNY cease negotiations and proceed with paying the counterparties the market value of their underlying CDOs and permitting them to keep the collateral already posted, effectively paying them par for securities that collectively had a market value, based on the amount of the collateral payments of approximately 48 cents on the dollar. According to these FRBNY executives, then-President Geithner 'acquiesced' to the executives' proposal. When asked by SIGTARP if the executives felt they had received their 'marching orders from then-FRBNY President Geithner to pay the counterparties par, one FRBNY official responded 'yes, absolutely.' The decision to pay effective par value was then brought before the Board of Directors of the FRBNY and the Board of Governors of the Federal Reserve. Each body gave its approval."

Moreover, at the end of the hearing, according to the Financial Times, a previously unpublished e-mail was disclosed: Written by 'TFG75' — Timothy Franz Geithner — to senior Fed officials, it asked: 'Where are you on the AIG counterparty disclosure issue?' The e-mail was written on March 15, 2009, the day on which the names of AIG's counterparties were released.

Check out my website.

No comments: