Geithner In The Hot Seat

I'm watching the TARP oversight hearing right now on the AIG swap payment disclosure fiasco. I'm shocked at how aggressively the Congressmen are grilling Treasury Secretary Timothy Geithner. Back during the AIG bailout, he was the President of the New York Federal Reserve, which was intimately involved in the bailout. Few of them appear to believe that Geithner would have known nothing about the NY Fed's decision not to disclose the detail of how banks would benefit from AIG's bailout as swap counterparties.

Republicans are absolutely tearing Geithner apart. Rep. John Mica (R - FL) even called for his resignation. Some Democrats are also very, very angry. In thinking about the timeline, they have some reason to be annoyed.

As early as November 3rd, 2008 Geithner was aware of the banks who would receive bailout money from NY Fed, and fact that the banks would not be forced to take a haircut on what AIG owed. On November 11th, there was an internal memo saying:

As a matter of course, we do not want to disclose that the concession is at par unless absolutely necessary.



Geithner responded that he was not involved in decisions about what information to disclose. Yet, as President of the New York Fed, wouldn't he be at all concerned about what Congress and the public knew about this historically unprecedented bailout? Even if he wasn't involved in the decision, couldn't it be argued that he should have been, as a responsible head of the NY Fed?

Now, Geithner likes to use the excuse that he was recused from AIG dealings once President-elect Obama nominated him as Treasury Secretary on November 24th. Yet, that was well after he could have made sure full information about the AIG swaps was disclosed. He didn't.