Tim Geithner has yet to be tripped up so far from questioning by the chair and the ranking member of the House Oversight Committee on the AIG bailout. Ed Towns, the chairman, asked him if he was involved in any discussions about disclosure of counter-party information, and Geithner reiterated that he had no role, though lots of people at the Federal Reserve Bank of New York played a large role in that (as has been revealed). The natural follow-up would be what kind of management style is that? How could Geithner not be aware, even before recusing himself after the Treasury nomination, of these incredibly important matters about AIG and Maiden Lane III? There’s having confidence in subordinates and there’s just being disconnected. Dan Burton (R-IN) said it “stretched credulity” that his attorneys and top officials were running around, before the Treasury nomination on November 24, discussing these disclosure issues, and he knew nothing.

On the issue of paying off the counter-parties at par, Geithner said, “If we had broken those contracts, threatened default, imposed haircuts, would have brought about a downgraded credit rating and firm would have collapsed,” rippling through the economy.

Darrell Issa (R-CA), the ranking member of the committee who got the emails out of AIG which precipitated this issue, brought up an email from Geithner to William Dudley (his replacement at the NY Fed) in March 2009, where he asked, “Where are you on the AIG counterparty disclosure issue?” Issa intimated that this proved Geithner’s involvement in the disclosure situation. Geithner replied that the issue was the subject of a “huge amount of controversy” at that time, with the Vice-Chair of the Fed Donald Kohn having testified about it to Congress. I think Geithner won that round, actually; the email proves nothing.

Geithner dodged a question about his knowledge of a report from Federal Reserve staff saying that AIG should not be bailed out, a report which was held back from Ben Bernanke. He said, in a kind of non sequitur, that “every decision we made was controversial.”

Elijah Cummings, who requested this hearing, seemed convinced. “I don’t know what anybody else would have done,” he said.

…Dennis Kucinich just had a strong round of questioning. Money quote: “Since when does saving the system require the taxpayers to give a better deal than the market would normally deliver… the government gave Goldman Sachs more than Goldman Sachs had a right to expect… if that doesn’t illustrate who the NY Fed thought they were working for, I don’t know what does.” Geithner replied that this wasn’t true, that the NY Fed was trying to fix the system and protect people from catastrophe. Some would say that 10% unemployment is a catastrophe.

David Dayen

David Dayen

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