Henry Paulson just wrapped up his testimony in the House Oversight Committee on the AIG bailout, and it was a remarkable bob and weave. Time and again, Paulson claimed that he had no involvement in the payment of counter-parties, saying that the Federal Reserve had the authority to administer Maiden Lane III and the technical expertise, and he allowed them to do their job. Paulson said he was involved in many other issues at that time, but not this one.
This confounded lawmakers, who watched Paulson very actively involve himself in practically all the terms of the bailout package, but not with this particular issue. It was simply unbelievable to Chairman Ed Towns and the others that Paulson would not have used his influence to get a better deal on counter-party payments for the taxpayers.
Dennis Kucinich’s questioning is a good representative sample. Here’s a paraphrase, from my notes:
Kucinich: The critical decisions regarding payments to counter-parties were made after passage of the bailout.
Paulson: That’s correct.
Kucinich: And in the bailout, the Treasury Secy is responsible for distributing TARP money. Doesn’t that make it your responsibility?
Paulson: TARP investment was equity. Those funds did not go into Maiden Lane III.
Kucinich: But you had no knowledge? Had no discussions? No role as Treasury Secy on counter-party payments? You never expressed an opinion?
Paulson: We were consumed with other matters.
Kucinich: I know you were personally talking with Sr. executives at all the financial institutions at this time. So how did you play no role? You had no interest in it? Despite Goldman Sachs’ role in the counter-party payments? You didn’t use your network of connections with people in Goldman to discuss this?
Paulson: I assumed Goldman and most firms were counter-parties, but I didn’t know the individual claims. My concern was what would happen to the American economy and American people. So much going on, we split up responsibilities and authorities.
Kucinich: Govt gave Goldman a better deal than it had a right to expect. How could this happen and you didn’t know anything about it? Did you recuse yourself on Goldman/AIG stuff?
Paulson: It was the Fed’s authority. I didn’t have to recuse myself because nobody discussed this with me.
Later on, Stephen Lynch (D-MA), who earlier took apart Tim Geithner in earlier testimony, mentioned that Paulson was CEO of Goldman Sachs until 2006, and was aware of their relationship with AIG at that time. “You would have known that Goldman was exposed” with credit default swaps, Lynch said. In response, Paulson insisted that he had no knowledge of the specific dollar amounts of the CDS.