Emails disclosed Thursday showed that the New York Fed instructed AIG to withhold from a securities filing information on the counterparties that received taxpayer money in AIG's bailout, including the fact that the counterparties got 100% of their investment back.
That information remained secret for months, until Congress pressured the Federal Reserve to give it up in March, over the Fed's insistence that doing so would damage market confidence.
The swaps were worth much less than what the government paid the counterparties. But Geithner, then the New York Fed chairman, backed full payment anyway. From a Huffington Post story coauthored by Client Number 9:
Regardless the size of the payments, the Fed's request to suppress both their amount and the parties to whole these payments were made would not have come to light without the release of these emails. Without the rest of the emails, we will be unlikely to fully understand what led to the collapse of AIG and the financial markets. If we can't understand it, we will be unable to prevent it from happening again.
Expect calls for Geithner's resignation to continue. But resist the temptation to view this burgeoning scandal--AIG is still on taxpayer life support, by the way--in isolation. Over the holidays, the unlikely duo of Jane Hamsher and Grover Norquist called on the Justice Department to investigate Rahm Emanuel's time on the board of Fannie Mae and Freddie Mac, the quasi-governmental housing giants who just got a blank check from the federal government and whose executives receive Goldman-Sachs-like bonuses. And only Mickey Kaus seems to know what's going on with the government's involvement in GM. The trickle of stories about cronyism and insider-ism could soon turn into a river of scandal for Democrats--especially if Republicans reclaim the House in November.
The Bailout State is likely to claim many victims. Will Geithner be the first?