French Were Willing to Negotiate AIG Discounts: Barofsky
This destroys the argument made by New York Fed officials (Geithner) that foreign banks (Societe Generale) were not allowed by law to accept less than full value on derivative contracts with AIG.
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(New York) -- A French regulator was willing to discuss allowing lower payments to retire American International Group Inc.’s obligations to the country’s banks, according to congressional testimony that undermines part of the rationale the Federal Reserve Bank of New York gave for paying full value.
France’s regulator was “open to further negotiations” to discuss the possibility of concessions by AIG counterparties Societe Generale SA and Credit Agricole SA’s Calyon unit, in November 2008, Neil Barofsky, the special inspector general for the Treasury Department’s Troubled Asset Relief Program, said in prepared remarks for a House oversight committee hearing today.
New York Fed General Counsel Thomas Baxter wrote to Barofsky last year that the regulator declined to demand concessions from U.S. banks partly because “it would not have been appropriate” when rivals in other nations were unwilling or “legally barred” from giving discounts.
“It appears officials at the New York Fed deceived or even lied to the inspector general regarding the French regulator’s position,” said Joshua Rosner, managing director at Graham Fisher & Co., a New York investment research firm.
AIG’s obligations had to be resolved quickly to avoid “catastrophic consequences” for the economy, Baxter said in prepared remarks for the hearing. “Taking additional time to press further for a discount was not justified.”
In his remarks, Geithner said, “everyone should realize that because of the actions of the Treasury and the Federal Reserve, the American financial system is now in a position where it can provide the credit necessary for economic growth.”
Barofsky learned subsequently that France’s Commission Bancaire was prepared to negotiate with the New York Fed, he said in today’s testimony. Previously the New York Fed told his office that the commission prohibited concessions, he said.
“The French regulators noted that such negotiations would have been unprecedented, would have likely required universal agreement among counterparties to make concessions, and would have had to be conducted in a transparent manner and at a high level, but continued negotiations were possible,” Barofsky said.
While the French regulators didn’t tell Barofsky what specific statements they made to New York Fed negotiators, they did say “they did not ‘slam the door’ to such continued discussions,” according to his testimony. Commission Bancaire spokeswoman Corinne Dromer declined to comment.
Jul 30, 2012 at 11:36 PM
Reader Comments (21)
AIG 100-Cents Fed Deal Driven by France Belied by French Banks
This is brilliant timing (is it timed?) on Barofsky's part--at the peak of the Bernanke kerfluffle. Thank you Neil! In light of this, those senators had better wake up. Their constituents are going to be aflame about a Bernanke reappointment.
You know you can visit my blog and I won't bite--usually, lol--I'll just delete you if I don't like you. You are kinda funny. I dedicated a song to monkeys today. Ha ha!
Sleep tight!
FDR 1942 “Our men on the fighting fronts have already proved that Americans today are just as rugged and just as tough as any of the heroes whose exploits we celebrate on the Fourth of July.
and
Many people ask, "When will this war end?" There is only one answer to that. It will end just as soon as we make it end, by our combined efforts, our combined strength, our combined determination to fight through and work through until the end-the end of militarism in Germany and Italy and Japan. Most certainly we shall not settle for less.
From Barry's State of the Union... OH NO HE DIDN"T...what a poor choice of a word...what a fraud.
Obama 2010 State of the Union…”Even as we PROSECUTE two wars, we are also confronting perhaps the greatest danger to the American people - the threat of nuclear weapons.
transitive verb
1 : to follow to the end : pursue until finished <prosecute a war>
2 : to engage in : perform
3 a : to bring legal action against for redress or punishment of a crime or violation of law b : to institute legal proceedings with reference to <prosecute a claim>
Yes, he used the word correctly in the context of prosecute a war but we all know WHY he used the word prosecute.
Dubya 2002 State of the Union..."We can't stop short. If we stopped now, leaving terror camps intact and terror states unchecked, our sense of security would be false and temporary. History has called America and our allies to action, and it is both our responsibility and our privilege to fight freedom's fight."
and...
"It costs a lot to fight this war. We have spent more than a billion dollars a month -- over $30 million a day -- and we must be prepared for future operations."
Dubya 2007 State of the Union..."Yet one question has surely been settled: that to win the war on terror we must take the fight to the enemy."
and...
This is not the fight we entered in Iraq, but it is the fight we're in. Every one of us wishes this war were over and won.
Clinton 1999 State of the Union..."So I say to all of you, if we do these things -- if we pursue peace, fight terrorism, increase our strength, renew our alliances -- we will begin to meet our generation's historic responsibility to build a stronger 21st century America in a freer, more peaceful world."
In any case, the primary terrorists are in Washington. They keep pointing to other places, but we shouldn't fall for it anymore. Strike the root.
IMHO--the absolute worst part was when he insulted the supreme court. I don't agree with their ruling, but how can a president be so disrespectful as to say those things at a state of the union address? Completely inappropriate! Then when the hopey dopey dems gave him a standing ovation for that comment, did you see the STEAM rising from the supremes?!?! WOW--I mean--they were pissed! (I wonder if they're having second thoughts about those birth certificate lawsuits, ha ha!) The circus is getting more and more out of control.
“The French regulators noted that such negotiations would have been unprecedented, would have likely required universal agreement among counterparties to make concessions, and would have had to be conducted in a transparent manner and at a high level, but continued negotiations were possible,” Barofsky said.
While the French regulators didn’t tell Barofsky what specific statements they made to New York Fed negotiators, ..."
Without knowing what they said to the NY Fed, how can anybody truthfully accuse the NY Fed of lying? Talk about getting the cart in front of the horse.
This is huge? You've got to be kidding me? It's nothing. Unprecedented! Universal agreement among counter parties! Do you know how many freakin' counter parties a company the size of AIG has? Even if they could limit it to the 62.1 billion deal, it's still lol. Barofsky is bad. He's incompetent. He's being charged with lying by a pretty solid financial journalist. His ardor to get Geithner has made him into a dismal, petty idiot.
After AIG's making billions in payments to counter parties with the initial 85-billion-dollar loan, these counter parties would universally agree to something like a .000001% haircut. How's that for saving the taxpayer some Barofsky-style cash?
What did I miss? That Sogen offered to accept concessions on some of the worst junk before the NY Fed loaned 85 billion dollars to AIG - it was in all the papers? So what? Do you think just maybe the presence of 85 billion dollars in AIG bank account may have changed SoGen's mind just a tad?
People present these negotiations that AIG was failing at before the NY Fed loaned 85 billion as being significant. When those negotiations were ongoing AIG was a freight train heading for the bankruptcy cliff. After the NY Fed loaned them 85 billion AIG WAS NOT A FREIGHT TRAIN HEADING FOR THE BANKRUPTCY CLIFF. I think the CPs probably picked up on that.
It's nothing. Watch it unfold. This is all going nowhere, and it will damage the President the entire way.
It doesn't matter what you or I or Thomas Baxter or anyone else speculates in regard to the Fed's power to negotiate. The point is that Geithner tells one thing and the truth turns out to be different. IF Geithner had said all along, "Look, negotiations weren't going very well, and we got really panicked and just paid out at par because that was the best thing to do...", then we could still hammer him for panicking and being a pushover, but we couldn't hammer him for also being a liar.
He also lied about when he knew about the fact that the counterparty payments were at par. Baxter testified under oath yesterday that they went to Geithner and presented this information to him on or by November 10, 2008. Geithner claims he never knew about it until it was in the media early 2009.
here's the link i was referring to in the previous comment...
Heck, I still want to know where I can find information on the investigation into the death of David Kellermann.
So, 550 billion, any guesses on why that has quietly slipped into the great beyond of onto bigger and better things.
I believe that David Kellermann was removed because he knew too much. DB, you may be right, people often discuss their vacation time shortly before hanging themselves (hmmmm). He knew what Paulson was hiding about the dumping of Fannie and Freddie bonds by Russia and the rest of the dirt we will learn soon.
Pelosi Promises "Pecora" Names This Week (2009)
http://www.dailykos.com/story/2009/07/13/753138/-Pelosi-Promises-Pecora-Names-This-Week
gobias I remember that well and I remember the Dems claiming they would hold Pecora Commission type investigations ROFLMAO here's your answer
Wall Street’s Collapse To Be Mystery Forever: Jonathan Weil
http://www.bloomberg.com/news/2011-01-28/wall-street-s-collapse-to-be-mystery-forever-commentary-by-jonathan-weil.html