Tag: Tim Geithner

The Full Story Of How Tim Geithner Secretly Bailed Out Wall Street And Screwed The Taxpayer Last Fall

Henry Blodget,

Oct. 28, 2009,

The Business Insider

When the historians finally finish sorting through the appalling decisions that have been made in the past two years, this one will probably be at the top of the heap.

Last fall, as AIG began to realize how screwed it was, it started negotiating with the counterparties to all the credit default swaps it had written.  One of the AIG’s goals was to persuade these counterparties–including Goldman Sachs–to accept buyouts discounts of as much as $0.40 cents on the dollar.

These sorts of negotiations are exactly what should happen when a company gets in trouble.  It goes to its creditors and says, look, we can’t pay you everything, so here’s your choice: Take something, or take your chances in banktuptcy court.  (And, in this case, this wouldn’t have been much of a choice, given the standing of CDS holders in the liquidation line).

But then Tim Geithner, head of the New York Fed, stepped in. 

A few weeks later, the counterparties–all of whom voluntarily did business with AIG and understood the risks–were bailed out at par: 100 cents on the dollar. 

Thus began the most nauseating giveaway in the history of the country.

Bloomberg has the whole sickening story:

By Sept. 16, 2008, AIG, once the world’s largest insurer, was running out of cash, and the U.S. government stepped in with a rescue plan. The Federal Reserve Bank of New York, the regional Fed office with special responsibility for Wall Street [run by Tim Geithner], opened an $85 billion credit line for New York-based AIG. That bought it 77.9 percent of AIG and effective control of the insurer.

The government’s commitment to AIG through credit facilities and investments would eventually add up to $182.3 billion.

Beginning late in the week of Nov. 3, the New York Fed, led by President Timothy Geithner, took over negotiations with the banks from AIG, together with the Treasury Department and Chairman Ben S. Bernanke’s Federal Reserve. Geithner’s team circulated a draft term sheet outlining how the New York Fed wanted to deal with the swaps — insurance-like contracts that backed soured collateralized-debt obligations…

Part of a sentence in the document was crossed out. It contained a blank space that was intended to show the amount of the haircut the banks would take, according to people who saw the term sheet. After less than a week of private negotiations with the banks, the New York Fed instructed AIG to pay them par, or 100 cents on the dollar. The content of its deliberations has never been made public…

The New York Fed’s decision to pay the banks in full cost AIG — and thus American taxpayers — at least $13 billion. That’s 40 percent of the $32.5 billion AIG paid to retire the swaps. Under the agreement, the government and its taxpayers became owners of the dubious CDOs, whose face value was $62 billion and for which AIG paid the market price of $29.6 billion. The CDOs were shunted into a Fed-run entity called Maiden Lane III.

Read the whole story (and then marvel about how Tim Geithner is now Treasury Secretary) >

One change makes you larger,

And one change makes you small,

And the ones Obama gives you, don’t do anything at all.

Go ask Geithner, when he’s ten feet tall.

Bring a shovel with you, he’s WAY down in that 10 trillion dollar rabbit hole no Obamabots want to talk about, he’s down there with the Mad Hatters of Wall Street and the Cheshire Cats of the Fed, he’s down there high-fiving his Goldman Sachs pals, they’re on a roll, they’ve been raking in market bubble billions and cashing in when those bubbles have exploded ever since the 1920’s.                

Mad Hatters, Cheshire Cats, whacko wingnuts and Goldman Sachs.

Are we having fun yet?

Digby observes that the American economy is essentially in the hands of the High Priests of the Federal Reserve, who do not answer to anyone, least of all to the great unwashed masses who allegedly aren’t equipped to handle something so important as money.

Considering the fact that America’s banking system has become the Clusterfuck of All Time, it seems to me that the High Priests of the Temple of Bernanke are the ones who can’t handle money.  Or keep track of it.  Or reveal how many trillions of dollars they’ve printed and who they’re handing all those trillions of dollars to.

Congressman Grayson:

The Federal Reserve has refused multiple inquiries from both the House and the Senate to disclose who is receiving trillions of dollars from the central banking system.  The Federal Reserve has redacted the central terms of the no-bid contracts it has issued to Wall Street firms like Blackrock and PIMCO, without disclosure required of the Treasury, and is participating in new and exotic programs like the trillion-dollar TALF to leverage the Treasury’s balance sheet.  With discussions of allocating even more power to the Federal Reserve as the ‘systemic risk regulator’ of the credit markets, more oversight over the central bank’s operations is clearly necessary.

Even more oversight than there already is???

Wow.  I didn’t know it was possible to have even more oversight over that Temple of Secrets and its Branch Temples on Wall Street than we already have.  But I know this much. . .

The High Priests will be very offended.  They’d already ordained themselves as Supreme High Pontiff Systemic Risk Regulators and now some heathen asshole in Congress is suggesting that they should be subject to even more blasphemous oversight.  

Tuesday ANKOSS wrote here in Obama’s Capitulation Statement that we have arrived at a point of “Capitulation complete; surrender accomplished. The banks are running America, and Obama is now their top PR man“.

These two short videos from Pepe Escobar should help to put that statement into the broader world context that wraps it…

Real News – April 14, 2009

Welcome to the new “New World Order”

Pepe Escobar Pt1: A tsunami of hype around another New World Order

Geithner’s in the basement,

Mixing up the medicine,

I’m on the pavement,

Thinking about the government.

Bankers in trench coats,

Every one’s a Madoff,

Say they got toxic debts,

Wanna get ’em paid off . . .

The banking system is rubble.  The economy’s imploding.  How did it come to this?   Why didn’t our “representatives” in Washington D.C. see this crisis coming?  Because they were too busy kissing Wall Street’s ass and K Street’s ass and Bush’s ass and the ass of every CEO in sight, that’s why they didn’t see this coming.      

We saw it coming.  We’re progressives.  We don’t need a fucking weatherman to know which way the wind blows.

We told America a hard rain’s gonna fall.  But America wouldn’t listen.

We saw a newborn baby with wild wolves all around it

We saw a highway of diamonds with nobody on it,

We saw a black branch with blood that kept drippin,

We saw a room full of men with their hammers a-bleedin,

We saw a white ladder all covered with water,

We saw ten thousand talkers whose tongues were all broken,

We saw guns and sharp swords in the hands of young children.

Crossposted from Antemedius

Thomas Ferguson is a political scientist and author who studies and writes on politics and economics, often within an historical perspective. He is a Political Science professor at the University of Massachusetts Boston, a contributing editor of The Nation, and is also the author of several books, the most recent of which is Golden Rule: The Investment Theory of Party Competition and the Logic of Money-Driven Political System.

Today, in the fourth of a series of interviews with Real News CEO Paul Jay, Ferguson calls the Obama/Geithner/Summers plan a “recipe for disaster”.

Note: I believe this interview was done before the G20.

Real News – March 28, 2009

Obama held hostage by PPPIP

Pepe Escobar: If Geithner’s plan does not work, the President sinks

President Obama’s destiny – more than his foreign policy decisions – will be sealed by how he deals with the US financial crisis, argues Pepe Escobar.

The verdict of top economists on Treasury Secretary Tim Geithner’s new PPPIP (Public Private Partnership Investment Program) has not been auspicious.

Some speak of taxpayer rip-off while Nobel Prize winner Paul Krugman foresees a “lost decade of zombie banks”.

The President has been trying to appease Wall Street while at the same time appeasing America’s anger directed at anything bank bailout-related.

On a global level the Chinese have made it known their patience with America’s addiction to debt has limits.

The upcoming G-20 meeting in London is bound to discuss more radical steps, while back in the US some already dream of a new saviour, post-Geithner.

Geithner’s Treasury $500 Billion to $1 Trillion Plan to Purchase Legacy Assets PPPIP Whitepaper is here (.PDF)

In “The Big Dither” Paul Krugman warns:

There’s a growing sense of frustration, even panic, over Mr. Obama’s failure to match his words with deeds. The reality is that when it comes to dealing with the banks, the Obama administration is dithering. Policy is stuck in a holding pattern.

Here’s how the pattern works: first, administration officials, usually speaking off the record, float a plan for rescuing the banks in the press. This trial balloon is quickly shot down by informed commentators.  Then, a few weeks later, the administration floats a new plan. This plan is, however, just a thinly disguised version of the previous plan, a fact quickly realized by all concerned. And the cycle starts again.

Welcome to Monty Python’s Flying Bank Bailout Circus.  Everything is under control.  Nudge, nudge.  Wink, wink . . .    

Say no more, say no more.