This is a sad story that is kept off the mainstream news. Where is Fox news on issues such as this? The last part of the article summarises five reason why Geithner should get the boot but discussion of these issues in the media is limited if not nonexistent. This is from alternet.
GeithnerGate: Obama's Treasury Sec. Should Get the Boot and Let's Take Our Money Back Too
By Les Leopold and Dylan Ratigan, AlterNet
Editor's Note: Published below Les Leopold's article is Dylan Ratigan's 5-point takedown of Geithner and why it's time for him to go.
"An arm of the Federal Reserve, then led by now-Treasury Secretary Timothy Geithner, told bailed-out insurance giant AIG to withhold key details from the public about overpayments that put billions of extra tax dollars in the coffers of major Wall Street firms, most notably Goldman Sachs." Huffington Post
Cover-up revelations keep coming about Timothy Geithner's secret assistance to AIG. The latest show that he urged AIG not to disclose how it would be shoveling money to Goldman Sachs and other large financial institutions by paying off its credit default swaps at par value instead of much less.
More than $60 billion changed hands that shouldn't have if Geithner had played hard ball. Therefore, the charge is that Geithner should be bounced because he was protecting the banks' interests ahead of the public interest. He may also have protecting himself during his confirmation hearings.
Ok, string him up. But what about recapturing the loot?
Before we pull the rope, let's take a closer look at this outrageous scam. During the bubble years, AIG conducted an extremely lucrative business guaranteeing all kinds of derivatives based on risky debt. They couldn't call it insurance because insurance products are regulated --- meaning you need to have reserves to back them up, which they didn't. So these toxic assets insurance polices instead got the fancy name "credit default swaps," which were not and still are not regulated. (Take a bow Phil Gramm, Robert Rubin, Bill Clinton and Alan Greenspan.)
This was the mother of all profit making businesses for AIG because in many of these deals AIG didn't have to put up any collateral as long as AIG was AAA-rated. The counter-parties (i.e. Goldman Sachs, JP Morgan Chase...) figured AIG was good for it. So AIG raked in fees for insuring toxic assets and didn't have to put up anything in return. Free money!
AIG figured the best hedge and the most money could be made by insuring more and more of this risky stuff. This was thought to disperse the risk broadly since all of the junk debt couldn't possibly fail at the same time, could it? They "insured" over $450 billion worth. (For the sordid details and comic relief, please see The Looting of America )
Then, the unthinkable happened. The assets tanked and AIG had to pay up on its policies, but couldn't. It was about to fold. Had AIG gone under it may have pulled with it hundreds of other financial institutions around the world that were relying on its insurance. The government stepped in to bail them all out. (AIG now spreads the fiction that this was just one rogue operation over in England in an otherwise safe and sound empire. But the big boys at the top of AIG all knew the credit default swap operation was a delectable source of enormous profits and shared in the booty... and they're not giving back any of the ill-gotten gains.)
We can argue some other time about whether or not some kind of bailout was necessary or what we should have gotten in return. The point here is that big fat financial houses like Goldman Sachs would have received pennies on the dollar for their AIG-backed credit default swaps had AIG gone into bankruptcy court. Instead, Goldman and others received par value and that money is now funding their mammoth profits and bonuses. (Spewing more corporate fiction, Goldman Sachs and JP Morgan Chase say they had been carefully hedged and would not have suffered from an AIG bankruptcy. Baloney. If AIG had gone under without a Federal rescue, those big banks would have gone down too or teetered on the edge.)
Here is precisely where free-market capitalism metastasizes into the billionaire bailout society. Goldman Sachs believed they had adequately covered $12.9 billion of its toxic assets by purchasing insurance from AIG. In fact, they believed those toxic assets plus the insurance made them as good as gold and part of their capital base.
In effect Goldman had placed two kinds of bets. First they bet on the toxic assets which were extremely lucrative, but risky. Then they bet that AIG could successfully insure them against losses on that first bet. They lost both bets. Too bad. That's capitalism....or used to be.
For losing their bet with AIG, Goldman Sachs should have only received about 20 cents on a dollar in a bankruptcy court. Instead, we bailed out AIG to prevent bankruptcy and Geithner et al pressured AIG to give Goldman Sachs 100 cents on the dollar. As a result, Goldman Sachs suffered no negative consequences at all from betting and losing. That's not capitalism. That's our new billionaire bailout society, where we, the taxpayers, pay off the bad bets. And the super-wealthy get more wealthy even when they lose their bets.
Think about it. Goldman Sachs alone got $12.9 billion - found money. Ka-Ching--right into its bonus pool. (OK, let's be fair. In bankruptcy they may have received $2.58 billion so the net windfall was $10.32 billion, which is about what it would cost to hire 172,000 teachers for one year.)
By all means, let's fire Geithner, and Summers too while we're at it. But if we really want to see some semblance of justice, we should slap a 90 percent windfall profits tax on all Wall Street firms. No matter how you cut it, they're all on welfare and their profits stem directly from our largesse. (Even those banks that have paid back TARP are, right this very minute, at the federal trough sucking up trillions of dollars of federal liquidity programs and asset guarantees.)
If the surging Tea Party really believed in its anti-bailout rhetoric, they'd be screaming for a windfall profits tax. But instead they so hate government and taxes that they'd rather let the biggest bankers in the world take our money and laugh all the way to the bank....in the Cayman Islands.
The Case Against Geithner -- by MSNBC Host Dylan Ratigan
As we sit here today, Wall Street continues to exploit a policy of government-sponsored giveaways and secrecy to pay themselves billions.
Record-setting bonuses due to banks like Goldman Sachs as early next week.
Yet instead of acting as our cop, Secretary Tim Geithner has become central to what may be a cover-up of the greatest theft in U.S. history.
Here is the evidence.
COUNT 1: The AIG Emails:
Recently-released emails show Geithner's New York Federal Reserve Bank directing AIG to keep details of the 100-cents-on-the-dollar bailout secret in 2008 -- A reversal of the traditional role of government, which is to force companies to become more transparent, not less.
A Treasury Spokeswoman says: "Secretary Geithner played no role in these decisions and indeed, by November 24, he was recused from working on issues involving specific companies, including AIG."
Friday, the White House also defended the Treasury Secretary:
Gibbs: These decisions did not rise to his level at the fed.
CNN's Ed Henry: How do you know that he wasn't involved? He was the leader of the New York Fed.
Gibbs: Right, but he wasn't on the emails that have been talked about and wasn't party to the decision that was being made.
He wasn't party to a decision to hide $62 billion dollar payouts to firms that became insolvent during his 5-year watch at the New York Fed?
Congressman Darrell Issa speculates that maybe Geithner wasn't on the emails in question because his people felt so strongly they already knew their boss's intentions, they didn't feel the need to bother him with the details.
COUNT 2: He wasn't even a regulator!
In Geithner's own words during confirmation hearings in March:
"First of all, I've never been a regulator...I'm not a regulator."
According to the New York fed bank's website, that was your job!! And I quote from the Fed's website: "As part of our core mission, we supervise and regulate financial institutions in the Second District."
That district of course is the epicenter for bailed out banks and billion dollar bonuses.
Count 3: "The Christmas Eve Taxpayer Massacre."
As you were wrapping those last presents, Geithner's Treasury Department lifted the 400-billion dollar cap on taxpayer responsibility for potential losses for Fannie Mae and Freddie Mac.
The new cap? Unlimited taxpayer funds! Interesting timing... Christmas eve, Tim?
Still no word on recovering the hundreds of millions paid to the CEOs who created this mess.
COUNT 4: He's too cozy with certain banks.
Remember those call logs when he first started... 80 contacts with Goldman Sachs, JP Morgan, and CitiGroup CEOs in just 7 months!
But Bank of America's CEO only got three calls. Apparently Bank of America is not one of Geithner's favorites, especially when you consider that there are still many unanswered questions about Tim Geithner's role in threatening to fire Bank of America management if they didn't go through with a deal to buy Merrill lynch.
COUNT 5: TARP Special Investigator Neil Barofsky's report says Geithner's New York Fed overpaid the big banks through AIG by billions of dollars.
Geithner says it had to be done. Maybe so, maybe not, but this takes us to our final point.
Since then, the Treasury Secretary has yet to really prove whose side he's on -- the Wall Street big wigs or the American taxpayer? Here's the litmus test: Mr. Geithner, show us the past ten years of AIG emails or step down so that we can get somebody who will. A crime has been committed against the American taxpayer and right now you are standing at the door of the crime scene refusing to let anyone in.
Show us you're not involved Mr. Geithner, prove the white house correct in defending you. All we are asking for is the transparency promised by the President you serve.
Les Leopold is the executive director of the Labor Institute and Public Health Institute in New York, and author of The Looting of America: How Wall Street's Game of Fantasy Finance Destroyed Our Jobs, Pensions, and Prosperity—and What We Can Do About It (Chelsea Green, 2009).
© 2010 Independent Media Institute. All rights reserved.
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