Geithner's Stock Plummeting

The Geither to Goldman clock keeps on ticking. New revelations about Secretary Geithner's mishandling of the AIG bailout while head of the New York Fed have once again set his stock plummeting in Washington, DC and fueled talk that Geithner is a liability to the Obama adminstration.

To recap, we know that in September 2008, AIG was running out of cash to cover all the credit default swaps it had issued and the Federal Reserve Bank of New York, headed then by Geithner, stepped in with an $85 billion dollar line of credit (later expanded to  $182 billion.) What AIG did with the bailout money was kept a secret. Six months later it was revealed that AIG had promptly taken the bailout bucks and handed it over to about 10 customers or counterparties, including Goldman Sachs and foreign banks, without forcing the counterparties to take a discount on the payments.

The counterparties were lucky to get a dime from taxpayer-owned AIG at that point, but to the surprise of many, they received 100 cents on the dollar. Later it was revealed that the New York Fed was responsible for the full payments. While AIG negotiators had secured discounts on the payments, the New York Fed intervened to make sure that the counterparties were made whole at 100 cents on the dollar, costing taxpayers an extra $13 billion or so.

Today, Bloomberg reported that emails secured by Republican Congressman Darrell Issa that show that the New York Fed had not only screwed up the bailout, but also pressured AIG and others to keep this information secret, possibly in contradiction to securities law. “It appears that the New York Fed deliberately pressured AIG to restrict and delay the disclosure of important information,”  said Issa. Taxpayers “deserve full and complete disclosure under our nation’s securities laws, not the withholding of politically inconvenient information.”

It is time for Geithner to come clean regarding the details of the AIG bailout and the mistakes that were made. The continued drip drip drip of revelations about this botched bailout serves no one.