Former New York Governor Eliot Spitzer says Treasury Secretary Tim Geithner sold us down the river — and started doing so years ago.
As evidence, Spitzer cites a new report on the government bailout of AIG, issued by Special Inspector General Neil Barofsky that reveals that then-New York Fed President Geithner and others capitulated to the very banks they should have been supervising.
After Geithner intervened in AIG’s negotiations with its counterparties, which included Goldman Sachs, JP Morgan Chase and UBS, they received 100 cents for every dollar the giant insurer owed them, even though they were ready to accept much less.
Geithner’s intervention added at least $13 billion to the bailout costs, which taxpayers will ultimately pay.
“Barofsky's report reads like a case study in failed negotiation,” Spitzer writes in Slate magazine.
“The New York Fed didn't have the backbone to stand up to Wall Street, didn't understand its capacity to protect taxpayers, and didn't appreciate that its responsibility was to taxpayers.”
“Geithner has tried to deflect some of this criticism by suggesting that it is ‘untainted by experience,’" Spitzer notes.
“I would suggest that it is Geithner who displays lack of experience in his dealing with the financial community. He doesn't know how to negotiate, doesn't understand what cards he holds, and doesn't understand the need for fundamental reform.”
The reasons for rescuing AIG have never been clear, says Peter J. Wallison, a senior fellow at the American Enterprise Institute.
“The (Obama) administration has consistently used the term "large, complex and interconnected" to describe the nonbank financial institutions it wants to regulate,” Wallison writes in The Wall Street Journal.
“The prospect that the failure of one of these firms might pose a systemic risk is the foundation of the administration's comprehensive regulatory regime for the financial industry.”
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