Stephen Lynch (D-MA), showing an unusual amount of fire, just lit into Tim Geithner in the House Oversight Committee hearing. He said that Geithner’s conduct was “not on the side of the American taxpayer.” He reminded Geithner that the Treasury Department “scalped the folks at Bear Stearns, 2 cents on the dollar. Goldman (Sachs, a counter-party to AIG) got 100 cents!”

Lynch added that it “stinks to high heaven what happened here” and called it inexcusable, saying “It makes me doubt your commitment to the American people.” Geithner replied that the American people would not have benefited from AIG defaulting, suggesting that was the only option other than paying off the counter-parties at par.

Lynch wasn’t buying it. “You were creating new facilities every week. We were changing the rules day by day. We had leverage, and we chose not to do it!”

Lynch closed by saying that “(Treasury Secretary Hank) Paulson brought everyone into a room, and said they were all taking bailout money, why couldn’t he have negotiated a better rate on behalf of the American taxpayer?” Geithner responded, “Why would I want to be in front of you today explaining actions that could have been avoided. If you cannot default, you do not have leverage. There was no choice between default and restructuring.”

Later on in the hearing, Marcy Kaptur (D-OH) got Geithner to admit that he never signed a formal or binding recusal agreement from NY Fed activities once he was nominated for US Treasury Secretary. The bulk of her questions sought to make the connections between the government operators involved in the AIG bailout and Goldman Sachs, the largest domestic beneficiary of the counter-party payments. She noted that the chairman of the NY Fed is elected by the individuals who sit on the board, which are the heads of the private banks in the region (“Not true,” Geithner said. “I work in the public interest”) She noted that Mark Patterson, Geithner’s current chief of staff, worked for Goldman Sachs. She said Hank Paulson, then the Treasury Secretary, worked for Goldman Sachs. She said Dan Jester, the man hand-picked by Paulson to be Treasury’s point person on AIG, also worked at Goldman Sachs. “You are suggesting that the people involved in this were not acting in the public interest… that is not true,” Geithner replied.

David Dayen

David Dayen