Who Was It Who, Oops(!), Forgot to Add a Clause to Prevent Humungous Bonuses to AIG Execs?
By SusanUnPC on March 17, 2009 at 10:20 AM in American Consumers, Bamboozling, Bank Bailouts, Economy
Can you name the person in charge — who was “in the room” at every turn — “who put together the original rescue plan for the American International Group”?
Can you guess the identity of that same person who, oops, didn’t bother to add a clause to the rescue plan that would guard taxpayers against being bilked by AIG’s executives who are now — barring a legal miracle — lining up for a pay-out of “hundreds of millions of dollars in bonuses”?
Can you figure out who was in charge of the “Federal Reserve Bank” which — operating entirely on its own on September 16, 2008, outside the purview of other government entities, including Congressional oversight — “created an $85 billion credit facility to enable the company to meet collateral and other cash obligations, at the cost to AIG of the issuance of a stock warrant to the Federal Reserve Bank for 79.9% of the equity of AIG? And, in November 2008, enabled “the U.S. government [to revise] its loan package to the company, increasing the total amount to $152 billion”?
Can you say the name of the person who many Wall Street executives said “deserves retirement, not promotion“?
Stumped? That’s okay. But don’t you think that person should be in the stocks so you can take turns throwing mud pies at his face? And shouldn’t that person be put out to pasture, kicked out on his ear and ridiculed and despised worldwide as much as Bernie Madoff? Well, maybe not, if you knew that the person in the stocks would be:
Timothy Geithner.
So sayeth a late November article in the New York Times’s “DEALBOOK COLUMN; Where Was Geithner In Turmoil?.”
And please keep in mind that it was PRESIDENT BARACK OBAMA who picked Tim Geithner as THE guy to bring in for Secretary of the Treasury. Yes, instead of the “retirement” he deserves, Mr. Geithner got the “promotion.”
Let the liberals blame the Bush administration all they want — well, they did have oversight of Mr. Geithner’s activities in September 2008 — but, why would PBO hire this man? Check this out, from the November 25th article written soon after Mr. Obama’s election;
President-elect Barack Obama unveiled on Monday an economic team with deep experience handling economic crises. But does the man at the center of this star-studded cast, Timothy F. Geithner, the nominee for Treasury secretary, have what is needed to take the nation in a new financial direction?
That is what a number of Wall Street chieftains are quietly asking, even after the stock market surged with relief after his nomination.
One reason Mr. Obama gave for nominating Mr. Geithner was Tim’s ”unparalleled understanding of our current economic crisis, in all of its depth, complexity and urgency.” More important, he suggested, ”Tim will waste no time getting up to speed. He will start his first day on the job with a unique insight into the failures of today’s markets — and a clear vision of the steps we must take to revive them.” [...]
… Mr. Geithner’s involvement in several ultimately ill-fated efforts to buttress the American financial system is the very reason some Wall Street C.E.O.’s — a number of whom spoke on the condition of anonymity for fear of piquing the man who regulates them — question whether he’s up to the challenge.
”We have only two things to say about Tim Geithner, who we do not know: A.I.G. and Lehman Brothers,” said Christopher Whalen of Institutional Risk Analytics. ”Throw in the Bear Stearns/Maiden Lane fiasco for good measure,” he said.
”All of these ‘rescues’ are a disaster for the taxpayer, for the financial markets and also for the Federal Reserve System as an organization. Geithner, in our view, deserves retirement, not promotion.”
Ouch.
”He was in the room at every turn of the crisis,” said another executive who participated in several such confidential meetings with Mr. Geithner. ”You can look at that both ways.”
[...]
Behind the scenes, Mr. Geithner was the point person for weeks of sleep-deprived Bailout Weekends. It was Mr. Geithner, not Mr. Paulson, for example, who put together the original rescue plan for the American International Group.
And, of course, Mr. Geithner also oversaw and regulated an entire industry whose decline has delivered a further blow to an already weakened American economy. Under his watch, some of the biggest institutions that were the responsibility of the New York Fed — Bear Stearns, Lehman Brothers, Merrill Lynch and most recently, Citigroup — faltered. While he was one of the first regulators to smartly articulate the potential for an impending disaster, a number of observers question whether he went far enough to stop the calamity.
Perhaps what has most people on Wall Street stirring is Mr. Geithner’s role in the fall of Lehman. At the time of its bankruptcy, he, along with Mr. Paulson, appeared to be the most vocal in supporting the government’s refusal to bail out the firm, according to people involved in various meetings. With hindsight, many in the financial industry blame a deepening of the global financial crisis on the government’s decision to let Lehman crumble.
Perhaps not surprisingly, there have been moves afoot in recent weeks by some in the New York Fed and Obama team to put distance between Mr. Paulson and Mr. Geithner, whose salary was $398,200 last year and who will take a pay cut to $191,300 in his new role.
These include the suggestion that Mr. Geithner was not in league with Mr. Paulson over Lehman; that Mr. Geithner pressed to save the firm from bankruptcy; that he was a lone voice on the subject and was overruled by Mr. Paulson and Ben S. Bernanke, the Fed chairman, on this issue.
The validity of this new claim is hard to verify. The New York Fed declined to comment.
Many executives suggest it may be a bit of revisionist history. ”If that’s true, he did a good job of hiding it,” said one executive who spent the weekend at the New York Federal Reserve the weekend of Lehman’s fall. …
Perhaps Mr. Geithner best skill is his ability to skate along side the media, as they join the highly popular rage at the AIG bonuses, while daintily side-stepping Mr. Geithner’s direct role in writing the deal that allowed those AIG executives to collect those big bonuses.
by Ronald Scott
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