GAO Report Says New York Fed Didn’t Cut Deals On A.I.G., Raises Questions About Geithner's Honesty
This is nothing new to Bail readers as we layed out exactly what happened in this story:
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Reprinted with permission.
WASHINGTON — The findings of a federal investigation released Monday raised new questions about the Federal Reserve Bank of New York’s handling of the 2008 bailout of American International Group.
The report, by the Government Accountability Office, says that New York Fed officials have offered inconsistent explanations for their decision to pay other financial companies the full amounts they were owed by A.I.G., and that some of the explanations were contradicted by other evidence.
The report also asserts that the decision to pay the full amounts, rather than seeking concessions as the government later did in other cases, disregarded the expectations of senior Fed officials in Washington and the expressed willingness of some of the companies to accept smaller payments.
In one case, when a company offered to accept a smaller amount of money, officials at the New York Fed responded that they had decided to pay the full amount of the debt, the report said.
The agency’s report revisits a controversial chapter in the history of the financial crisis: the government’s decision to sink tens of billions of dollars into A.I.G., the world’s largest insurance company, which was running out of money to cover its vast and losing bets on the health of the housing market. Much of that money was then paid to other companies to honor their outstanding contracts with A.I.G.
The basic conclusion echoes the findings of previous federal investigations. The rescue mission succeeded, but efforts to minimize the costs and risks borne by taxpayers were insufficient. But the new report also raises concerns about the explanations subsequently offered by New York Fed officials.
For example, the G.A.O. says that officials at first told its investigators that they had initiated discussions about possible concessions with most of the 16 companies that stood on the other side of insurance-like contracts, called credit-default swaps, with A.I.G.
Then, according to the report, the officials said they had contacted eight companies before abandoning the effort. Even then, the report said, only four of those companies confirmed that they had been contacted by the Fed.
The New York Fed declined to comment on the specific account of the negotiations. Officials of the bank, including Timothy F. Geithner, then the president of the New York Fed and now the Treasury secretary, have testified that they needed to act quickly to prevent greater damage to the financial system, and that they chose the approach that was most likely to succeed and easiest to enact.
The bank said in a statement Monday that it had “put together an effective lending program that minimized disruption to the economy from A.I.G. while safeguarding the taxpayer interest.”
Representative Elijah E. Cummings, Democrat of Maryland and the ranking member of the House Oversight Committee, said the report highlighted the importance of the financial legislation passed last year.
“This report reinforces the need to implement provisions in Dodd-Frank that will prohibit the use of taxpayer dollars to artificially prop up or benefit one firm,” said Mr. Cummings, who with Representative Spencer Bachus, Republican of Alabama and the chairman of the House Financial Services Committee, requested the report as a final word on the controversy.
The Federal Reserve Board of Governors voted in September 2008 to let the New York Fed lend up to $85 billion to A.I.G. as part of a deal that placed the company under federal control. The bailout was expanded several times, ultimately expanding to more than $180 billion. And roughly a quarter of that money was used to pay 16 companies that had bought credit-default swaps from A.I.G. — a roll call of the most prominent names on Wall Street, including Deutsche Bank and Goldman Sachs.
Federal Reserve officials in Washington expected that the New York Fed would negotiate discounts with those companies since, without the government’s intervention, they might have received far less.
An analysis commissioned by the New York Fed recommended concessions around $1.1 billion to $6.4 billion. But according to the New York Fed, when it asked companies if they were willing to accept voluntary discounts, only one company said yes, conditional on everyone else doing it, too.
New York Fed officials told the G.A.O. that they had little leverage to secure concessions from the companies. Moreover, they concluded that A.I.G.’s inability to secure concessions in earlier negotiations suggested that the banks were unwilling to compromise. And they were constrained by a decision to apply the same repayment terms to all of the counterparties.
The G.A.O. report questions the basis of the Fed’s insistence on equal treatment, noting that there were significant differences in the quality of the assets covered under the insurance agreements, and therefore the potential losses for each company were quite different. An analysis found that under extreme conditions, the losses would vary from 75 percent of the original value down to 1 percent.
The differences, the study concluded, “might have offered an opportunity to lower the amount” that the government sank into the rescue. Fed officials told the G.A.O. that negotiating with each company individually was impossible given the pressure to act.
The report also questions the Fed’s assertion that it could not wrest concessions from French banks — who held some of the largest contracts — because French law banned them from accepting discounts unless A.I.G. had filed for bankruptcy. A French official told the G.A.O. that there was no such prohibition, although such a decision might have raised legal concerns.
The Fed’s actions contrast with the agreement that European governments, led by Chancellor Angela Markel of Germany, secured from some of the same institutions in October to accept discounts of up to 50 percent on their holdings of Greek debt.
Feb 1, 2012 at 4:55 PM
Reader Comments (24)
http://dailybail.com/home/the-call-tim-geithner-didnt-make-while-his-new-york-fed-watc.html
Isn't it amazing that, within only one week of Tiger Woods crashing his Escalade, the press found every woman with whom Tiger has had an affair during the last few years?
And, they even uncovered photos, text messages, recorded phone calls, etc.!
Furthermore, they not only know the cause of the family fight, but they even
know it was a wedge from his golf bag that his wife used to break out the
windows in the Escalade.
Not only that, they know which wedge!
And, each & every day, they were able to continue to provide America with
updates on Tiger's sex rehab stay, his wife's plans for divorce, as well as the
dates & tournaments in which he will play.
Now, Barack Hussein Obama has been in office for two years, yet this very same press:
. Cannot find any of his childhood friends or neighbors;
· Or find any of Obama's high school or college classmates;
· Or locate any of his college papers or grades;
· Or determine how he paid for both a Columbia & a Harvard education;
· Or discover which country issued his visa to travel to Pakistan in the
1980's;
· Or even find Michelle Obama's Princeton thesis on racism.
They just can't seem to uncover any of this.
Yet, the public still trusts that same press to give them the truth, the whole truth, and nothing but the truth!
I find that totally amazing, don't you?
=
What the hell are you on about? I don't like Obama, I think he's morally bankrupt and unless someone is holding the lives of his family hostage he has no excuse for the many crimes his administration has been a part of.
But why on earth do you think you need the financial details of his college education? Why does it matter? We KNOW he's in the hands of the monied interests (for short-hand, call it the 1%. It may be a slightly different subset of the 1% than Bush was captured by but I'll bet the overlap was more than what was left out). This is like saying "I know we'll find proof John Doe was a murderer" when he has already signed a confession. The actions tell you everything you need to know.
Also, when he was going to college, he didn't have a label of "future president" on him. People throw stuff away. Really. I graduated 6 years ago and I'd be shocked if you asked every single prof and any of them kept my term papers or tests. If there was anything weird there we would have heard about it. The answer is: there's nothing weird there.
You don't need a conspiracy theory to explain this! It basically how politics always was and probably always will be.
cleaner version:
“The ____ people as a whole will become its own Messiah. It will attain world dominion by the dissolution of other races, by the abolition of frontiers, the annihilation of monarchy and by the establishment of a world republic in which the ____will everywhere exercise the privilege of citizenship.
In this New World Order the children of ____will furnish all the leaders without encountering opposition. The Governments of the different peoples forming the world republic will fall without difficulty into the hands of the ____. It will then be possible for the _____rulers to abolish private property and everywhere to make use of the resources of the state. Thus will the promise of the Talmud be fulfilled, in which is said that when the Messianic time is come, the ___will have all the property of the whole world in their hands.”
— Baruch Levy. Article: Letter to Karl Marx, in magazine ‘La Revue de Paris’, p.574, June 1, 1928
is this better for u?
Inquiring minds are reading the complete text of President Obama's State of the Union Address to see what distortions, lies, and hypocrisy it contains.
I found a nice Orwellian set of paragraphs smack in the middle of his speech.
And while Government can’t fix the problem on its own, responsible homeowners shouldn’t have to sit and wait for the housing market to hit bottom to get some relief.
That’s why I’m sending this Congress a plan that gives every responsible homeowner the chance to save about $3,000 a year on their mortgage, by refinancing at historically low interest rates. No more red tape. No more runaround from the banks. A small fee on the largest financial institutions will ensure that it won’t add to the deficit, and will give banks that were rescued by taxpayers a chance to repay a deficit of trust.
Let’s never forget: Millions of Americans who work hard and play by the rules every day deserve a Government and a financial system that do the same. It’s time to apply the same rules from top to bottom: No bailouts, no handouts, and no copouts. An America built to last insists on responsibility from everybody.
Top to Bottom: More Bailouts, More Handouts, More Copouts
While reading the first paragraph above I knew without a doubt a huge bailout proposal was coming up.
Sure enough, the very next paragraph contained a massive bailout proposal and in more ways than is readily apparent at first glance. For starters "responsible homeowners" don't need mortgage relief. Secondly, $300 a month is a lot of dough so I would like to see an accounting.
Finally, and most importantly, every loan that is refinanced will be paid off in full. Thus, any bank, hedge fund, mortgage provider, or GSE that is paid off on a nonperforming loan will be immediately made whole.
This is a massive backdoor bailout of banks, mortgage companies, hedge funds, foreign banks, and anyone else holding mortgage related garbage.
In case you were wondering about the big rally in bank shares this year, this proposal just might have something to do with it.
The Orwellian irony of it all comes in the third paragraph with Obama's bald-faced lie "It’s time to apply the same rules from top to bottom: No bailouts, no handouts, and no copouts."
How the Taxpayer Ripoff Works
continue http://globaleconomicanalysis.blogspot.com/2012/01/obama-proposes-mortgage-bailouts.html
Cuffed Or Bribed?
http://market-ticker.org/akcs-www?post=201420
Oh, and how BHO killed "Osama Bin Dead" for 10 years now. BHO just had him killed a 2nd time to be sure...............& how they all watched it live on tv at the white house...............
& how all them girls up state NY with the Tick's havent been told its from the HPV Vaccines they were forced to take, becouse the goverment is makking up some
"Cock-&-Bull" story on stress thAre all under.................
Oh, and which calf pail it used to drink Tainted Milk from that cauzed the MC in the first place. That Goverment...?
http://www.huffingtonpost.com/2012/02/28/wall-street-psychopaths_n_1307168.html
Lets see, one out of ten. That works out to every high level executive on Wall Street. No wonder the bastards are destroying the country. They're all insane wackos and they're driving the bus.
They own the U.S. Congress, the U.S. Supreme Court, The President and his whole Goldman Sachs administration. The used to be the greatest nation on earth is being controlled and destroyed by a bunch of Power Crazed, Gambling Addict, Psychopathic Criminals who should be locked up somewhere with lots of rubber room accommodations for the Criminally Insane.
Be afraid people, be very very afraid!
That said, anything you have to say about agriculture should be posted anywhere you like here. Your input on the subject is appreciated.
It said it was awaiting editorial approval and won't let me post it possibly due to the links I had attached. Do you have access to anything hanging in "the awaiting approval" realm. You will really want to see those links.
I am having the same problem with a good link.
I cannot see anything awaiting approval as my permissions are quite limited.
http://dailybail.com/home/gao-report-says-new-york-fed-didnt-cut-deals-on-aig-raises-q.html#comment17185236
How about cut and paste the link MINUS the http: like this...
//dailybail.com/home/gao-report-says-new-york-fed-didnt-cut-deals-on-aig-raises-q.html#comment17185236
just note that you have to add http: or https: at the beginning of the link(s) and paste that in your browser to see the article or whatever linked.
I know it is a pain in the ass but it might be the only way left to communicate. When I see that, I will fix it so that it will become a clickable link. Readers who see this post or the "add http: to the beginning of link" message will know what to do until I make the correction (which will make it a clickable link).
This is no skin off of my ass to be a pain in theirs. Thanks.
The Gulf of Mexico will soon approach totally dead. The insanity is in The City of London where an obsolete old vicious notion is gasping its last and taking out all biology on earth in the process. Fukushima was sited, designed, commissioned, and licensed by the U.S. under Nixon with the Bush criminal cabal in charge. The Rockefellers were the main push, like with the self-destructing WTCs. Japanese companies did all they or anyone else could have done, given the restrictions and forced development. The Japanese government has proven itself out of control in remedy efforts at Fukushima.
With all the genius applications of the most recent discoveries and technologies by Japan, the Fukushima mess and Japanese government responses puzzled the Hell out of me until I discovered someone holds a gun to the heads of the Japanese elected government. More U.S. criminal cabal since WWII. Bush41 losing it and upchucking all over the Japanese Prime Minister before passing out some years back got me thinking, as the continuing superiority of Japanese manufactured goods. The Fukushima facility was an American installation, competently assembled by Japanese contractors and designed to take out Tokyo on cue. The MOX reactor and MOX spent fuel pool was taken out on a rare day when the prevailing wind had reversed so the ejected pulverized fuel pellets wafted toward Tokyo and beyond. This was the single most stupid act ever carried out by any human EVER.
Don't panic. You can't afford it. See jimstonefreelance.com and Jim Stone interviews @ projectcamelotportal.com to get you started with being informed as to undeniable Fukushima U.S.G.S. and Japanese earthquake data and pretsunami tremors along the coast. There was no 9.0 earthquake that day. The swine are waging genocide without our permission. Same as it ever was.
See the recent promo shots released by Buckingham featuring England's Prince 'Me First' Harry with a super enlarged head, like those standing near him. Back in the 1930s, my uncle Joe got a weird patent for a new lens which did not distort the size of politician's heads when the CFR news tried to convince the public that THEIR politicians were brainiacs with huge skulls. Uncle used to work with the 'Crash Corrigan' serial. He simply used a simple traditional lens in a demonstration that netted him this patent. He was soon discovered and bought out. Then he invested in 3M at 10 cents a share and off he flew. They still use this phony lens world-wide on the CFRtv to make their mainstream criminal candidates seem brainiac and wise. Local stations use the phony lens for their newscasters often and always. Timmy Geithner DOES have a big head. They over did it with Prince 'Me First' Harry on a recent junket to 'the colonies'. A head that big would require a neck brace. A size 15 1/2 hat, at least.