Timothy Geithner, They Don't Like You

Today, Tim Geithner, one time President of the New York Fed and current Secretary of the Treasury was the first piece of meat to thrown to a wolf pack of lawmakers sent out by the taxpayers eager to gnaw away on anyone responsible for having anything to do with anything bailout related.

If only they sold tickets to shit like this, we'd have our bailout paid for in no time.

Geithner has the dubious position of being scapegoat #1. From what I've read, it sounded less like a run of the mill congressional hearing and more like a shitty, mid 90's courtroom drama that you catch three am after waking up on the couch and can't pull yourself away from. And it has some of the quintessential elements of the genre too, an attack on the defendants personal character, a group of people ganging up on him (pause), testimony that goes off into the hinterlands of irrelevance before using it to make a point, and the poor, mistreated defendant finally reaching his boiling point and responding to questions with shockingly bitter yet underplayed insults.

The heart of the issue wasn't the bailout, but rather the method and manner in which the money was shelled out. Basically, the first 85 billion dollars AIG got went right into the hands of investment banks caught up in all of AIG's tomfoolery. But the more offensive way to look at this is to consider why an equally evil entity like Goldman Sachs deserves to be paid 100 cents on the dollar on every AIG related contract.

It's infuriating. It's offensive, it's shameful, but Geithner argued completely necessary. For starters, Geithner felt he had no authority to demand banks take anything less that the full amount owed. And when Dennis Kucinich asked him if the NY Fed gave Goldman Sachs a "better deal than it would have expected from AIG or any other market player," Geinther told him point blank,

"Under the law of the land, we did not have the ability. So we faced a very simple choice: Let AIG default or prevent it. There was no way, financial, legal, or otherwise we could have imposed haircuts, selectively default on any of those institutions without the risk of a downgrade and default." Or, once the New York Fed sat down and started asking for those affected for a deal, AIG's ratings could downgrade, and the ripples would spread far and fast and there would be no point of this bailout in the first place.

Kucinich of course disagrees.

His other argument basically runs along the lines of, "I didn't have time." Geithner believed, rightly or wrongly, the financial apocalypse was going to happen on November 10th. The bailout had to go through or it would be curtains. From his statement, here's a brief rundown Geithner's AIG doomsday scenario:

"...We saw not just an escalating run on banks, but also a broad withdrawal of funds from money market
funds. These funds, always thought of as one of the safest investments for Americans, had begun
trading at a discount. The run on these funds, in turn, severely disrupted the commercial paper
market, which was a vital source of funding for many brick and mortar businesses.

The panic spread. Major institutions such as Washington Mutual and Wachovia experienced
debilitating deposit withdrawals, eventually collapsed, and were acquired by competitors. These
pressures spilled over to virtually all credit markets. Markets for instruments backed by
consumer loans, such as auto loans, credit card receivables, and home-equity lines of credit
collapsed, and in response banks tightened standards and sharply curtailed the issuance of new
loans.

Air’s failure would be catastrophic. AIG was much larger than Lehman, it was spread across more countries than Lehman, and while it posed many of the same basic risks as Lehman, they were actually greater because of Air’s role as an insurance company. AIG was one of the largest life and health insurers in the United States. AIG was also one of the
largest property and casualty insurers in the United States, providing insurance to 180,000 small
businesses and other corporate entities, which employ about 100 million people. History suggests that the withdrawal of a major underwriter from a particular market can have large, long-lasting effects on the households and businesses that rely on basic insurance protection.

This damage would have rapidly spread beyond Wall Street. Borrowing costs for businesses
would have increased dramatically, the value of pension funds would have fallen even more
sharply, and job losses would have skyrocketed. We were witnessing these effects in the wake
of Lehman’s failure. Without assistance, the AIG parent holding company would have been forced to file for
bankruptcy protection like Lehman Brothers, resulting in default on over $100 billion of debt, as
well as trillions of dollars of derivatives. Such a filing would have caused insurance regulators
in the United States and around the world to take over Air’s insurance subsidiaries, potentially
disrupting households’ and businesses’ access to basic insurance. And since many of the
insurance products that AIG sold were a form of long-term savings, the seizure by local
regulators of Air’s insurance subsidiaries could have delayed Americans’ access to their
savings, potentially triggering a run on other institutions.

---
So he had to do it because he had no legal authority and no time. In regards to not having time to bargain, I believe Geithner gets the benefit of the doubt. We were in the midst of a massive financial meltdown with worldwide consequences never before seen. I believe Geithner was terribly frightened of what could realistically happen, and I'll accept he honestly believed we were headed for the economic Rapture. So yes, if you believed we were headed that way, and quickly, I'll allow you the time defense.

What I can't accept is the first excuse, because the only logical conclusion to draw from it is that our Treasury Secretary is an enormous pussy. A huge fucking pussy this guy. Rather than forcing Goldman Sachs to accept less than 100 percent, he hides behind his excuse that he had no authority, "legal or otherwise" to do so. Buddy, you are the Secretary of the Treasure, of the United States of Fucking America! Are you fucking kidding me? If you didn't have the time to negotiate with them, then you should have never negotiated. The conversation shouldn't have lasted longer than three minutes.

Geithner: Here's what I want you to do.
Goldman: Nah, we won't settle for less than everything we are owed.
Geithner: You'll take what I give you or.
Goldman: Or else what?
Geithner: Excuse me?
Goldman: It sounded like you were about to threaten me.
Geithner: Fucker, I don't need to threaten you. You will fucking take what we give you and be happy at that. I'm about to be the motherfucking Treasury Secretary and when I get that position, I will force every single regulatory committee to look into every single transaction you make. I will drown you in a see of paper. I will have the IRS look into everything, every bonus you've ever handed out, every per diem never filed for, everything. I will be in that ass forever and ever.
Goldman: You don't have any legal authority.
Geithner: Fuck legal authority. I will own you. I don't need to. I will make sure that the American people know if AIG fails and we fall back into the stone ages, the one thing people will know is you were the bad guy. I will do everything I can to change the story. I will rewrite what went down. There will be no Madoff, no Lehman, even AIG won't be the bad guys anymore. Instead, the story will be simple, Goldman Sachs could have stepped up and saved the American economy, but they chose instead to ruin it.
Goldman: Well I don't...
Geithner: Fuck you, you're taking 40% and you'll be happy with it. Or else you don't even wanna know the hell that will reign on you.

That's what should have happened. This is a circumstance where might would have made right.
-----

Unfortunately all the blame game and hoopla it generates distracts from probably the most important issue in moving forward, mainly, what systems of regulation are going to be put into place to prevent a situation like this from ever happening again? So far, our government has done nothing, and instead of trying to enact a system of vital and urgently needed reforms, the only bipartisan energy being spent is to crucify those responsible for the bailout. I don't see how this serves us as taxpayers. I'd much rather have both sides come together to prevent the type of hysterical greediness responsible for this calamity rather than blaming those who spent their efforts on our rescue. And Geithner, whose job is very much in question, even spoke out at the end of his hearing, off the cuff and off his script, imploring the Obama administration, the same Obama administration that appointed him, to get their act together:

"If are outraged by A.I.G. — and you should be — if you are outraged by what happened with A.I.G., then you should be deeply committed to financial reform. The United States of America should never have let institutions like A.I.G. take on a level of risk that threatened the stability of the financial system.”

Meanwhile, the hearing continues, blocked emails and more will be discussed.

---
check this video out.
http://www.huffingtonpost.com/2010/01/27/tim-geithner-testimony-ai_n_438271.html