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:
Many financial experts expected AIG to negotiate with the counterparties for a discounted rate, thus achieving the best possible deal for U.S. taxpayers. Instead, the New York Fed arranged to pay full price in what amounted to a backdoor bailout of large financial companies. Aware that the bailout details would anger taxpayers, the Fed applied pressure on AIG to keep the details quiet and out of all SEC filings
Evidence obtained by the House Oversight and Government Reform Committee now demonstrates that officials at the New York Fed ordered AIG officials not to disclose details about the decision to pay the counterparties the full price.
To facilitate the cover up, the Fed instructed the Special Investigator General for the Troubled Asset Relief Program (SIGTARP), Neil Barofsky, not to release documents to the Committee that would aid an ongoing investigation.
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.