Geithner and AIG: The mess gets messier

How low can this go? The Fed told AIG to keep mum on who got paid off with taxpayer dollars

Topics: Bank Bailouts, Valentines Day, How the World Works, Timothy Geithner, Federal Reserve, Goldman Sachs, Wall Street, Bolivia,

How much worse can the handling of the AIG “backdoor bailout” of late 2008 begin to smell? Bloomberg has a new story reporting that representatives of the Federal Reserve Bank of New York, which at the time was helmed by Timothy Geithner, told AIG not to reveal the names of the counterparties that the insurance company owed billions of dollars to — debts that ended up getting made good at 100 cents on the dollar with taxpayer money. Even worse, Bloomberg has e-mails in which AIG noted to the Fed that their understanding of SEC regulations required them to make the names public, and the Fed still told the company to keep quiet.

Unamused commentators are rightfully scornful of the response provided to Bloomberg by the Fed.

“Our position has always been that if AIG’s securities lawyers determine that AIG is legally obligated to make a particular filing or disclosure, then that is what AIG must do,” said Jack Gutt, a spokesman for the New York Fed, in an e-mailed statement. Gutt said it was appropriate for the New York Fed, as party to deals outlined in the filings, “to provide comments on a number of issues, including disclosures, with the understanding that the final decision rested with AIG’s securities counsel.”



Horse-pucky. Remember — the justification for bailing out AIG’s swap debts to the likes of Goldman Sachs and others was based of the premise of preventing further shocks to an already reeling financial system. Fair enough, and given the widespread panic in the fall of 2008, and the huge time pressures that everyone was working under, some mistakes can be forgiven. But what seems clear from the Bloomberg report is that the Fed knew that there would be negative political fallout if the identities of AIG’s counterparties were made public, and it explicitly encouraged AIG to, at the very least, skirt the edges of legality. That’s no mistake.

Andrew Leonard

Andrew Leonard is a staff writer at Salon. On Twitter, @koxinga21.

More Related Stories

Featured Slide Shows

  • Share on Twitter
  • Share on Facebook
  • 1 of 13
  • Close
  • Fullscreen
  • Thumbnails
    Clare Barboza/Bloomsbury

    Uncommon Apples

    Api Étoile

    Like little stars.

    Clare Barboza/Bloomsbury

    Uncommon Apples

    Calville Blanc

    World's best pie apple. Essential for Tarte Tatin. Has five prominent ribs.

    Clare Barboza/Bloomsbury

    Uncommon Apples

    Chenango Strawberry

    So pretty. So early. So ephemeral. Tastes like strawberry candy (slightly).

    Clare Barboza/Bloomsbury

    Uncommon Apples

    Chestnut Crab

    My personal fave. Ultra-crisp. Graham cracker flavor. Should be famous. Isn't.

    Clare Barboza/Bloomsbury

    Uncommon Apples

    D'Arcy Spice

    High flavored with notes of blood orange and allspice. Very rare.

    Clare Barboza/Bloomsbury

    Uncommon Apples

    Esopus Spitzenberg

    Jefferson's favorite. The best all-purpose American apple.

    Clare Barboza/Bloomsbury

    Uncommon Apples

    Granite Beauty

    New Hampshire's native son has a grizzled appearance and a strangely addictive curry flavor. Very, very rare.

    Clare Barboza/Bloomsbury

    Uncommon Apples

    Hewes Crab

    Makes the best hard cider in America. Soon to be famous.

    Clare Barboza/Bloomsbury

    Uncommon Apples

    Hidden Rose

    Freak seedling found in an Oregon field in the '60s has pink flesh and a fragrant strawberry snap. Makes a killer rose cider.

    Clare Barboza/Bloomsbury

    Uncommon Apples

    Knobbed Russet

    Freak city.

    Clare Barboza/Bloomsbury

    Uncommon Apples

    Newtown Pippin

    Ben Franklin's favorite. Queen Victoria's favorite. Only apple native to NYC.

    Clare Barboza/Bloomsbury

    Uncommon Apples

    Pitmaston Pineapple

    Really does taste like pineapple.

  • Recent Slide Shows

Comments

0 Comments

Comment Preview

Your name will appear as username ( settings | log out )

You may use these HTML tags and attributes: <a href=""> <b> <em> <strong> <i> <blockquote>