Geithner's crimes through AIG : will the truth come out?

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marcchabotyt
November 01, 2009

Max Keiser and Stacy Herbert and Webster Tarpley talk about AIG being used by Tim Geither to line in the pockets of Goldman Sachs and others recorded on October 31th 2009 . http://www.bloomberg.c...

Max Keiser and Stacy Herbert and Webster Tarpley talk about AIG being used by Tim Geither to line in the pockets of Goldman Sachs and others
recorded on October 31th 2009

.

http://www.bloomberg.com/apps/news?pi...

New York Feds Secret Choice to Pay for Swaps Hits Taxpayers

By Richard Teitelbaum and Hugh Son

Oct. 27 (Bloomberg) -- In the months leading up to the September 2008 collapse of giant insurer American International Group Inc., Elias Habayeb and his colleagues worked nights and weekends negotiating with banks that had bought $62 billion of credit-default swaps from AIG, according to a person who has worked with Habayeb.

Habayeb, 37, was chief financial officer for the AIG division that oversaw AIG Financial Products, the unit that had sold the swaps to the banks. One of his goals was to persuade the banks to accept discounts of as much as 40 cents on the dollar, according to people familiar with the matter.

Among AIGs bank counterparties were New York-based Goldman Sachs Group Inc. and Merrill Lynch & Co., Paris-based Societe Generale SA and Frankfurt-based Deutsche Bank AG.

By Sept. 16, 2008, AIG, once the worlds 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, 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 governments 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. Bernankes Federal Reserve. Geithners 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.

Subprime Mortgages

CDOs are bundles of debt including subprime mortgages and corporate loans sold to investors by banks.

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 Feds decision to pay the banks in full cost AIG -- and thus American taxpayers -- at least $13 billion. Thats 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.

Habayeb, who left AIG in May, did not return phone calls and an e-mail.

Goldman Sachs

The deal contributed to the more than $14 billion that over 18 months was handed to Goldman Sachs, whose former chairman, Stephen Friedman, was chairman of the board of directors of the New York Fed when the decision was made. Friedman, 71, resigned in May, days after it was disclosed by the Wall Street Journal that he had bought more than 50,000 shares of Goldman Sachs stock following the takeover of AIG. He declined to comment for this article.

In his resignation letter, Friedman said his continued role as chairman had been mischaracterized as improper. Goldman Sachs spokesman Michael DuVally declined to comment.

AIG paid Societe General $16.5 billion, Deutsche Bank $8.5 billion and Merrill Lynch $6.2 billion.

New York Fed

The New York Fed, one of the 12 regional Reserve Banks that are part of the Federal Reserve System, is unique in that it implements monetary policy through the buying and selling of Treasury securities in the secondary market. It also supervises financial institutions in the New York region.

The New York Fed board, which normally consists of nine directors, in November 2008 included Jamie Dimon, chief executive officer of JPMorgan Chase & Co., and Friedman. The directors have no direct role in bank supervision. Theyre responsible for advising on regional economic conditions and electing the bank president.

Janet Tavakoli, founder of Chicago-based Tavakoli Structured Finance Inc., a financial consulting firm, says the government squandered billions in the AIG deal.

Theres no way they should have paid at par, she says. AIG was basically bankrupt.

Citigroup Inc. agreed last year to accept about 60 cents on the dollar from New York-based bond insurer Ambac Financial Group Inc. to retire protection on a $1.4 billion CDO.

for the rest of the bloomberg article click on the url above

Category: News & Politics

Tags:

Elezabeth Warren Goldman Sachs AIG Timothy Geithner Bailouts tim geithner Max Keiser Stacy Herbert Webster Tarpley david morgan jim puplava peter schiff max marc faber obama ben bernanke alan greenspan ronald reagan silver gold precious metals bullion dollar collapse market crash economy federal reserve inflation deflation finance stocks audit the fed hr1207

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Text Comments (16) Options

dontblamethemessenge (1 month ago) Show Hide

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well one good thing, money went to Dutch banks.
Thank you very very much US citizens.
Please send us more.

Strettger (1 month ago) Show Hide

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Om nom nom, pax Europa eh? :)

kdcruz75 (1 month ago) Show Hide

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geithner is the trustee to the US bankruptcy .(1933)..
he is the one decides how the administration of the bankruptcy is dealt with ...
no one tells teh trustee how to run the show
unless all governments declare war on the international banking cartel..
until the bankruptcy is carried along the trustee is in control and will do whatever he pleases until the beneficiaries instruct him otherwise. WHo are the beneficiaries ???

Paetaor (1 month ago) Show Hide

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Now Dodd finds religion?

Why couldn't he do what was right over the past 30 years he has been in Washington?

I hope Peter Schiff cleans his clock.

PressForFreedom (1 month ago) Show Hide

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IDK who that guy after Max was, but he doesn't understand English. He kept calling these people Free Marketers and that's a lie, a free marketer would let them do what they want and let them FAIL!

mindrapeart (1 month ago) Show Hide

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he was being sarcastic.

PressForFreedom (1 month ago) Show Hide

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Yeah I must have missed that, thanks.

taineasy (1 month ago) Show Hide

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Tim "Side Show Bob" Geithner has GOT TO GO. He, Paulson, Summers, Bush should be brought up on treason charges. They are true enemies of the state.

fatpius (1 month ago) Show Hide

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and, they will. never soon enough, but it will be worth waiting for.

TonyUnplugged (1 month ago) Show Hide

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AIG is not going to pay back the $16 billion that went to pay off Goldman Sachs and other banks that made wild bets on derivatives. These crooks probably took out bets with AIG that Lehman Brothers would fail.

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Geithner's crimes through AIG : will the truth come out?

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