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Treasury Secretary Timothy Geithner was summoned to testify before the House Committee on Oversight and Government Reform yesterday in order to answer two questions: why did he sign off on AIG paying the big banks full value on insurance for bad assets like mortgage-backed securities--using $62 billion in taxpayer money--at a moment when everyone else was taking losses? And what was his role in the decision not to disclose to the public--which owned 80 percent of AIG at the time--the names of the banks and the payments they received, as AIG was prepared to do before the Federal Reserve Bank of New York (FRBNY) run by Geithner advised them not to?
Geithner's answer boiled down to this: the decision in early November 2008 to pay Goldman Sachs, Bank of America, Merril Lynch, Citigroup, Societe Generale, Deutsche Bank and others 100 cents on the dollar was part of a broader effort to save AIG and it prevented an economic catastrophe; and on November 24, 2008, when he was nominated to serve as treasury secretary, he recused himself "from involvement in monetary policy decision, policies involving individual institutions, and day-to-day management of FRBNY." (Was there anything left for him to do around the joint? And why was he still getting a paycheck?) Geithner said he therefore had nothing to do with the nondisclosure decision in December 2008.
But Geithner didn't recuse these AIG matters up from his office, he recused them down to the vice president of the NY Fed. Apparently, decision-making over tens of billions of dollars of taxpayer money wasn't deemed a top-level priority by him or his predecessor, former Treasury Secretary Henry Paulson, who also testified. In fact, Congresswoman Marcy Kaptur discovered through her questions that no formal recusal agreement outlining Geithner's new responsibilities (or lack thereof) was ever executed.
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