What would you think about the Federal Reserve Bank of New York telling AIG to intentionally withheld from public scrutiny that AIG was paying 100 cents on the dollar for credit default swaps at the same time that AIG was crying for a bailout from the public, thereby hiding from the public that the public was functionally bailing out Goldman Sachs and other large banks? What would you think about the fact that Tim Geithner headed the New York Federal Reserve when this was going on? Eliot Spitzer, William K. Black and Frank Partnoy sum up the issue:
Today, a Bloomberg story revealed that under Timothy Geithner’s leadership, the Federal Reserve Bank of New York told AIG to withhold details from the public about its payments to banks during the crisis. This information was discovered when emails between the company and the Fed were requested by representative Darrell Issa, ranking member of the House Oversight and Government Reform Committee.
Who owns AIG? The taxpayers own 80% of it. Therefore, AIG should release the emails. Who can and should make this decision?
The taxpayer’s stake in AIG is held by the A.I.G. Credit Facility Trust, whose three trustees are Jill M. Considine, a former chairman of the Depository Trust Company and a former director of the Federal Reserve Bank of New York; Chester B. Feldberg, a former New York Fed official who was chairman of Barclays Americas from 2000 to 2008; and Douglas L. Foshee, chief executive of the El Paso Corporation and chairman of the Houston branch of the Federal Reserve Bank of Dallas. We call on these three officials (interestingly all former Fed officials) to immediately release the documents we request. The value of these documents, if it were ever in doubt, was certainly proved by today’s revelations.
Release the emails.
See also, this earlier post on a NYT op-ed by Spitzer, Black and Partnoy.
While looking through some older articles, I happened across a November 2005 edition of Natural Science. An AIG ad decorates the back cover. Note the AIG claim that “You can count on us.” Also note the claim that “50 million customers know the strength and experience of the AIG companies can help secure your financial future.”
None of this fluff was technically untrue. It turned out to be true in terrible way that will rob Americans of tax revenue for decades to come. AIG has helped to secure a bleak financial future for most Americans, while securing a windfall for a well-connected group of elite executives.
But perhaps this tragedy and this should-be-crime needs to be quantified to be appreciated. The AIG bailout followed AIG’s calculated decisions to gamble in a dangerous way in search of obscene profits, rather than to be content with its honest business of selling insurance. Then, when the house of cards came crashing down, AIG somehow convinced our lawmakers to divert our precious tax dollars to preserve AIG, which responded by trying to pay out $165 million in bonuses to its employees for a job well done.
How much federal tax money has gone to AIG to date? The latest count is $30 billion dollars. To put that in perspective, note that there are approximately 112,000,000 American households. If each American household were to each bear the same share of this $30B bailout of AIG, they would each pay more than $250. $250 is considerably more than the price of a Nintendo Wii. Can you imagine the outcry if Congress had approved buying a Wii for every household in America? What a horrific and irresponsible waste of money that would have been, especially when that money is desperately needed for education, infrastructure and alternative energy, to name only a few things.
AIG is the poster boy of why we cannot have “too big to fail,” yet it is not on President Obama’s agenda to break up the big financial corporations that still sit there like huge ticking time bombs.
It turns out that in the process of “saving” AIG, Treasury Secretary Tim Geithner (then acting as president of the New York Fed) hammered American taxpayers. If you Google “AIG criminal,” you’ll find almost nothing of note in recent months. Apparently, intentionally threatening the entire American economy in the pursuit of greed is not a criminal issue. Ruining the national economy is not as serious as stealing bread from a grocery store or smoking a joint.
“We can have democracy in this country, or we can have great wealth concentrated in the hands of a few, but we can’t have both.” –Supreme Court Justice Lous D. Brandeis
For all the discussion of “green shoots” and an economy on the mend, there’s plenty of data and commentary to the contrary. What’s interesting to me, is that recent developments only highlight the extent to which Main Street economics have become irrelevant to Wall Street.
The administration is claiming that the crisis is largely over, and that it’s time to breathe a sigh of relief. President Obama yesterday argued that “we can be confident that the storms of the past two years are beginning to break.” Treasury Secretary Timothy Geithner discussed last week beginning to wind down some of the programs that were implemented in the heat of the crisis late last year. The value of the Dow Jones Industrial Average has risen from its July low of 8146, and is now trading around 9600. Everything seems well and good in the world of high-finance.
But others see it differently. Nobel-prize winning economist Joseph Stiglitz argued this week that nothing has been done to address the underlying banking problems that created the mess in the first place, adding that “the problems are worse than they were in 2007 before the crisis.” Simon Johnson, former chief economist of the IMF, echoes that sentiment, and points out that the real issues underlying the crisis have not been addressed at all. He lays out 4 areas of concern:
- The big banks need to be made to be dramatically smaller.
- Executives need to have a great deal of their personal wealth tied up in their banks to prevent a reckless focus on short-term results.
- An end to the revolving door between Wall Street and Washington, DC. “There is no way people should be able to go directly (or even overnight) from a failing bank to designing bailout packages to benefit such banks. In any other industry, in any other country, and at any other time in American history, this would have been seen as an unconscionable conflict of interest. “
- The financial elite is aware that they are able to exploit the Federal Reserve and use it as a “bailout machine”.
Robert Sheer has crunched some big numbers and shared them at TruthDig:
The good news on the government’s “No Banker Left Behind” program is that, according to the special inspector general’s report on Tuesday, the total handout to date is still less than 3 trillion dollars. It’s only $2.98 trillion, to be precise, an amount six times greater than will be spent by federal, state and local governments this year on educating the 50 million American children in elementary and secondary schools. The bad news is that even greater amounts of money are to be thrown down what has to be the world record for rat holes…
Now Summers and the other finance gurus who move so easily from Wall Street to Pennsylvania Avenue assure us that those professionals who made the toxic swap deals are too big to fail and must be entrusted with 3 trillion of our dollars to save themselves from disaster. And thanks to the laws they wrote, the bankers are likely to be covered for their socially destructive behavior by a get-out-of-jail-free card.
Rachel Maddow knows how to keep after a story. More journalists should take heed that they shouldn’t merely serve as stenographers for those in power. They should aggressively pursue their stories, like Maddow did here, and speak truth to power. And shame on Laura Tyson for not taking the initiate to disclose her [...]
Don’t read this if you want to sleep well tonight. Stay away from the comments too. People would be swarming in the streets with pitchforks and torches tonight, except that so many of us are afflicted with innumeracy and because we are so easily distractible. How many of us have spent more time studying the [...]
I don’t always agree with Ron Paul, but what he stated on October 3, 2008 to the U.S. House of Representatives, about the alleged “bailout” bill, rings true to me: Madame Speaker, only in Washington could a bill demonstrably worse than its predecessor be brought back for another vote and actually expect to gain votes. [...]