By Douglas McIntyre
Treasury Secretary Timothy Geithner was cross-examined yesterday by the House Oversight and Government Reform committee. The lawmakers could not understand why AIG (AIG) got $182 billion in taxpayer bailout cash.
They said that it was an even greater enigma that $62 billion of that money should go to pay AIG counterparties which are essentially firms that used the insurance company to cover risk on their derivatives investments. It is fair for Congress to ask why a firm like Goldman Sachs (GS) received 100 cents on a dollar from AIG when the NY Fed or Treasury might have forced Goldman to take less go save taxpayer’s money.
Geithner’s answers were not what the committee wanted to hear, but they were almost certainly based on an accurate assessment of the credit markets at the time of the crisis late in the fall of 2008. Geithner says that they NY Fed did not have the right nor did it have the time to enter into negotiations with each of AIG’s counterparties. Some of those counterparties might have faced financial
distress of their own if AIG had failed to pay them full face value for its obligations.
No comments:
Post a Comment