Geithner Tells House He Was Out of the Loop
Bernanke's not the only member of the Obama economic team in trouble.
2:54 PM, Jan 27, 2010 • By MATTHEW CONTINETTI
Treasury secretary Timothy Geithner was president of the New York Federal Reserve when the government nationalized insurance giant AIG and paid counter-parties to the company's credit default swaps 100 cents on the dollar. That was in 2008. In January 2010, taxpayers have poured $180 billion into AIG (so far!) and Congress has uncovered evidence that the Fed did not disclose the full details of its interactions with AIG counter-parties such as Goldman Sachs. Here's GOP congressman Darrell Issa of California in the Washington Examiner:
Geithner went to the Hill this morning to answer questions about AIG. Needless to say, the meeting wasn't amicable. Geithner is a lot more comfortable around rich bankers than he is around the people's representatives.
When asked if he knew what was going on with AIG, Geithner said he was out of the loop: "I withdrew from monetary policy decisions." Nevertheless, Geithner says, the AIG bailout was necessary to forestall a complete collapse of the global financial system. No one wanted to take that risk. But would the financial system really have disappeared if AIG's counter-parties only got 10-, 50-, 80-cents on the dollar? Dennis Kucinich wants to know:
That's from the Times's account, incidentally. The whole encounter was ugly. Rep. John Mica, the Republican of Florida, gets credit for bringing up Geithner's tax evasion.
Why does Geithner remain Secretary of the Treasury? He lives under a Pig-Pen-like ethical cloud. Obama sided with Volcker over Geithner in the debate over what to do about proprietary trading. Now Geithner says he was clueless to what his own agency was doing with AIG. Not exactly the steadiest hand on the wheel.
Obama named Geithner to the cabinet for reasons of institutional continuity and personal reputation. Both of those qualities have become liabilities in recent months, however. What's left are Geithner's personal ties to the banking titans the president has decided to turn against. That's a bad position to be in. Thus it is only a matter of time before our Treasury Secretary decides what he'd really like to do is spend more time with the family.