BOOK EXCERPT - Geithner's Temper And Transparency Exposed: "No one has ever made the banks disclose the type of shit that I made them disclose..."
Former SIGTARP Neil Barofsky's new book, Bailout, is in pre-release, and it doesn't look good for Tim Geithner, who apparently made an enemy of the wrong former prosecutor.
As for Geithner's claim of 'unprecedented transparency' that you will read below, consider that, while Inspector General, Barofsky published a report that found Geithner and Stephen Friedman personally responsible for tens of billions in losses to taxpayers for NOT negotiating with AIG counterparties, and then covering it up.
"I never would have imagined that one day one of the most powerful government officials in the world would be dropping f-bombs on me."
That's Neil Barofsky's response to being on the receiving end of an epic tantrum by Treasury Secretary Timothy Geithner in the fall of 2009, after Barofsky dared to suggest that Geithner had perhaps not been the most transparent Treasury secretary in the entire history of the country.
"Neil, I have been the most fucking transparent secretary of the Treasury in this country's entire fucking history!" Geithner erupted, in an episode that had Barofsky wondering if Geithner was going to "throttle" him. At the time, Barofsky was the special inspector general in charge of oversight of the Troubled Asset Relief Program.
It's one of the juicier episodes in Barofsky's new book, "Bailout: An Inside Account of How Washington Abandoned Main Street While Rescuing Wall Street." The book recounts Barofsky's front-row view of how the Bush and Obama administrations handled the bailouts of banks, auto makers and homeowners after the financial crisis. Few players come off looking great in the book, but Geithner and his Treasury Department are cast in a particularly bad light.
"I said that I thought our capacity as a nation to deal with what could be a continuing financial crisis was being undermined by a loss of faith in government," Barofsky writes. "Then I said that the current loss of government credibility could be traced to Treasury's mishandling of TARP."
"Geithner got dramatic," Barofsky writes: "'Neil, you think I don't hear those criticisms? I hear them. And each one, they cut me,' he said, pausing and then making an emphatic cutting motion with one hand as he said 'like a knife.'"
After a Geithner subordinate in the room, Herb Allison, expresses personal offense at Barofsky's suggestion that Geithner has not been fully transparent, Barofsky responds:
"I am not suggesting that the secretary has failed in transparency, I am stating it. Mr. Secretary, you've failed to be sufficiently transparent, and that is one of the reasons why people are so angry."
And that's when the ticking time bomb that was Geithner erupted, says Barofsky:
"'No one has ever made the banks disclose the type of shit that I made them disclose after the stress tests. No one! And now you're saying that I haven't been fucking transparent?'"
At that point in the meeting, Barofsky says, "Geithner looked as if he was going to get out of his chair and throttle me. As we parried back and forth, Geithner repeatedly reached a pitch of anger, regaling me with detailed expletive-filled explanations that established my apparent idiocy. He would then calm himself down and give me a forced, almost demonic smile."
The meeting ended on a relatively cordial note, but that did not change Barofsky's assessment of the meeting: "It was the weirdest meeting of my life."
DB here. Here's an excerpt from Barofsky's report on Geithner and AIG.
“As you know, in late 2008 AIG was attempting to negotiate a haircut for banks that held $62 billion in CDS from AIG. AIG was reportedly seeking to persuade the banks to accept haircuts of as much as 40 cents on the dollar in order to retire these CDS contracts.”
It is also disturbing that, at the time this secret deal was made, FRBNY Chairman Stephen Friedman, a member of the board of Goldman Sachs, purchased more than 50,000 shares of GS before knowledge of the FRBNY’s bailout of AIG counterparties became public knowledge. According to news reports, this transaction has earned Mr. Friedman over $5 million in profit.
Finally, according to one AIG executive quoted in news reports, the FRBNY may have attempted to manage public disclosure of its decision to pay AIG’s counterparties at par by pressuring the company not to file pertinent documents with the SEC.
They’d tell us that they don’t think that this or that should be disclosed. They’d say, “Don’t you think your counterparties will be concerned?” It was much more about protecting the Fed.