John Mica slams Treasury Secretary’s “lame excuses” during fiery hearing
Treasury Secretary Timothy Geithner’s denial that he played any role in the AIG cover-up is contradicted by emails which confirm that both Geithner and the New York Federal Reserve were both intimately involved in keeping details about payments to banks including Goldman Sachs from the public.
Geithner told lawmakers today that he had no involvement in withholding information about the bailout of AIG, much to the chagrin of House Oversight Committee Ranking Member Darrell Issa, who wasn’t buying it for a second.
“He has asserted complete ignorance of the Fed’s efforts to cover up the bailout details,” said Issa, R-Calif. “Many Americans, including members of this Committee, have a hard time believing that Secretary Geithner entered an absolute cone of silence on the day that his nomination was announced.”
John Mica of Florida went further, calling for Geithner to quit as a result of the scandal.
“Why shouldn’t we ask for your resignation?” Mica asked Geithner. “We’re not getting the whole story, we’re getting the blame story. You’re either incompetent on the job or you knew what was taking place and you tried to conceal it, and I think that’s grounds for your review.”
Mica characterized Geithner’s denials as “lame excuses” as the Treasury Secretary became visibly angry.
In November and December 2008, The Federal Reserve Bank of New York, headed up by Geithner, instructed the bailed out AIG to hide from the public details regarding payments the insurance giant made to banks, including Goldman Sachs Group Inc. and Societe Generale SA.
Using Fed secured taxpayer bailout money, AIG paid several banks 100 percent of the face value of credit-default swaps, as other financial institutions were negotiating deep discounts for the unregulated paper assets that do not have to be backed by cash.
The decision to pay the banks in full may have cost AIG, and therefore taxpayers, at least $13 billion over the odds.
The “backdoor bailout” of the banks, as it has been dubbed was exposed in March 2009 after the SEC challenged AIG’s filing, however, e-mails obtained by Representative Darrell Issa, ranking member of the House Oversight and Government Reform Committee, reignited the situation after they conclusively exposed a collusion between AIG and the Fed to deceive the public.
The e-mails between company and regulator show that The New York Fed crossed out reference to the payments and that AIG also omitted the details when the Securities and Exchange Commission filing was made public on Dec. 24, 2008.
The emails, the content of which are highlighted in this Bloomberg News article, also show that the Fed wanted numerous other details about the AIG bailout withheld or delayed from public oversight.
“It appears that the New York Fed deliberately pressured AIG to restrict and delay the disclosure of important information,” said Issa, adding that taxpayers “deserve full and complete disclosure under our nation’s securities laws, not the withholding of politically inconvenient information.”
Geithner’s denial that he, even as President of the New York Fed, had no involvement with the AIG case is contradicted by fresh revelations this week in a new report issued by Issa that show Geithner was “at a minimum, engaged personally in reviewing what information about the AIG bailout would be revealed to Congress and the public.”
On November 6, 2008 Geithner received an email from Sarah Dahlgren, the FRBNY’s lead staff member in AIG’s operations, seeking Geithner’s approval for a proposed statement regarding AIG’s upcoming equity capital raise. The fact that Geithner’s approval had to be obtained merely for putting out statements concerning AIG clearly indicates that he was deeply involved in the matter.
On November 13, Geithner was sent a report on AIG’s restructuring that would be sent to Congress. Sophia Allison, a staff member of the Federal Reserve’s Board of Governors, asked that Geithner point out any information that he believed should not be “publicly disclosed”.
In addition, records of who Geithner met with during his tenure as President of the FRBNY “show that he was regularly engaged with top AIG officials and the FRBNY officials directly responsible for AIG’s disclosures to the SEC. Geithner’s schedule shows that he had at least six formal meetings with top FRBNY staff members about AIG-related issues between November 4, 2008, and November 21, 2008.”
Watch the clip from today’s hearings where Mica demands Geithner’s resignation.