The US Treasury Secretary Timothy Geithner (pictured above) had to once again go on the defensive this month regarding his involvement with the bailout of AIG. At the time he was head of the New York Federal Reserve which was responsible for the bailout of the company and asked it to withhold information from its SEC (Securities and Exchange Commission) filings relating to how much money will be paid out to its counterparties.
Involvement
President Barak Obama's administration has defended Gietner by pointing out that he was not directly involved with the New York Feds legal team that was responsible for advising the company. But even the most reasonable of observers has wondered why the Fed wanted to pay 100 per cent of the value of AIG debts and not even try to lower the amount.
Even if you believe the Treasury Secretary had nothing to do with legal issues concerning the bailout, he has gone repeatedly to the Senate to say the government had to pay the full value of AIG's debt when now we know it's simply not true.
At the beginning of this month the email correspondence between AIG and the New York Fed was released that showed AIGs counterparties were willing to accept a lower amount than what was actually owed to them and that the company itself said to the government they want to try to lower the amount.
However, the New York Fed said they should not do so and that they should not make this fact public. Which brings us back to the captain of the ship who seems to enjoy describing apocalyptic scenarios about what would have happened had the government not paid out the sums of money it did and now we know he had the opportunity to lower the bill, thereby reducing the unbelievable debt burden it left the country with.
The Treasury Secretary at the time, Henry Paulson, is also denying involvement in this decision.
Relationship
Geithner's background and close relationship with Wall Street have not helped alleviate the current pressure on him.
If the Obama administration wants us to believe that Geithner had no idea about the New York Fed's instructions to AIG while the biggest bailout in US history was being negotiated by the agency he was running, then let's not kid ourselves, it's going to be business as usual with this American president.
