Update at bottom: Dem Congressman tears into Geithner: ‘It makes me doubt your commitment to the American people’; NY Times notes “liberals and conservatives alike, took turns hectoring”
WASHINGTON — US Treasury Secretary Timothy Geithner told lawmakers Wednesday he acted properly in the 2008 bailout of AIG and the subsequent disclosure of payouts from the insurance giant to major banks.
Geithner, facing increasing heat over his role in the bailout when he was president of the New York Federal Reserve, said the actions were aimed at financial stability and that authorities “did not act to help foreign banks.”
“Congress granted the Federal Reserve emergency authority precisely so that the government had some capacity to act to contain a systemic financial crisis,” he said in testimony prepared for delivery to a congressional panel.
“Not to have used that authority at that time would have been deeply irresponsible.”
Geithner also maintained that he was not involved in a decision to withhold information about AIG’s payouts that some have called a “backdoor bailout” of those firms including Goldman Sachs and a number of foreign banks.
“I had no role in making decisions regarding what to disclose about the specific financial terms of… payments to AIGs counterparties,” he said.
Overall, Geithner offered an impassioned defense of the role of the central bank and other authorities to resscue AIG in the face of what appeared to be a financial system meltdown in September 2008.
“We did not act because AIG asked for assistance,” he said.
“We did not act to protect the financial interests of individual institutions. We did not act to help foreign banks. We acted because the consequences of AIG failing at that time, in those circumstances, would have been catastrophic for our economy and for American families and businesses.”
Geithner’s remarks were prepared for delivery to the House of Representatives Government Oversight Committee on his role — when he was president of the New York Federal Reserve — in the controversial AIG bailout.
The Fed provided a loan of 85 billion dollars to AIG in September 2008 in what would be the first portion of a staggering bailout worth some 180 billion dollars.
Fed chairman Ben Bernanke, who has also taken heat over AIG and his economic stewardship, has welcomed congressional efforts to look into the AIG bailout.
As the New York Times reports, “Throughout the morning, Mr. Geithner tried to persuade lawmakers that the government acted ‘in the best interests of the American people,’ and not in the interests of big banks, in particular, as many lawmakers asserted, Goldman Sachs. Mr. Geithner, while keeping his composure throughout the questions, was also forceful in defending his position.”
“I think the commitment to Goldman Sachs trumped the responsibility that our officials had to the American people,” Representative Stephen F. Lynch, Democrat of Massachusetts, told Mr. Geithner. His voice rising, his finger pointed at Mr. Geithner, Mr. Lynch told Mr. Geithner: “It stinks to the high heavens what happened here. I don’t like the obfuscation. And to top it all off, the disclosure was not there.”
Lynch said, “It makes me doubt your commitment to the American people.”
The Times adds, “Members of both parties, liberals and conservatives alike, took turns hectoring Mr. Geithner. At times, the hearing took on a scolding, even berating, tone.”
The following video was posted to YouTube by The Financial Dope blog: