Please keep in mind that the Federal Reserve is a private entity, not controlled by the Government, and is owned by the member banks. Thus, when Geithner was head of the NY Fed, he was employed by the big banks that own the Fed, not the taxpayers, and yet he was spending 10's of billions of U.S. tax money to bail out his employers. This is a subtlety of which a lot of people are unaware, but it is fact.
Here are the highlights:
- The CFO of the derivatives division at AIG was hoping to persuade the counter-party banks like
Goldman to take 40 cents on the dollar - GEITHNER ARRANGED TO GIVE THE BANKS FULL
VALUE AND THE MONEY USED WAS TAXPAYER MONEY. Essentially what this disclosure
reveals is that AIG knew their paper was worth AT MOST 40 cents, and probably A LOT less.
Geithner game them 100 cents.
- The Government's financial commitment to AIG - i.e. Taxpayer financial commitment - added up to
- "The New York Fed’s decision to pay the banks in full cost AIG -- and thus American taxpayers -- at
least $13 billion. That’s 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."
From documents obtained by Bloomberg News, it has become clear that Tim Geithner knowingly transferred 10's of billions in Taxpayer money to completely insulate the banks who were exposed to AIG derivatives counterparty risk. Stunningly, this describes what happened:
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 [Goldman, et. al.] par, or 100 cents on the dollar. The content of its deliberations has never been made public.Several points are made clear from this new released today. 1) Tim Geithner, while head of the NY Fed, was taking instructions from the big banks; 2) Geithner structured the bailout of AIG in a way which prevented these big banks from taking any losses on their exposure to AIG; 3) Taxpayer money was used to pay off the banks and pay huge bonuses for 2008, both to the banks and to AIG; 4) Tim Geithner knowingly oversaw all of this, despite his statements of denial.
It is clear that Tim Geithner's role as Secretary of the United States Treasury is to make sure the big money center banks - the banks who were the biggest contributors to Obama's election campaign - do not suffer any losses as a result of their role in pumping the financial system full of trillions of deadly credit default derivatives. Geithner was put in place as Treasury Secretary - despite that fact that he had been caught red-handed more than once cheating on his personal tax returns - in order to perpetuate the big bank bailout set in motion by former Secretary Henry Paulson.
The trail of evidence is indisputable. This is why Ben Bernanke and the Federal Reserve is spending millions in a massive lobbying effort to derail any attempts by Congress to implement an independent audit of the Fed. It also explains why Obama failed withdraw his nomination of Geithner to be Treasury Secretary after it was revealed that Geithner was a multiple-year tax dodger. These are the people running our country and allocating your tax money.