January 27th, 2010
12:56 PM ET
13 years ago

Geithner: 'I had no role' in an AIG cover up

[cnn-photo-caption image= http://i2.cdn.turner.com/cnn/2010/images/01/27/art.getty.geithner.frustrat.jpg caption="Geithner: 'I had no role' in an AIG cover up."]

New York (CNNMoney.com) - Treasury Secretary Timothy Geithner told lawmakers Wednesday that he had no involvement in an apparent attempt by government regulators to withhold crucial information about AIG's bailout from the public.

"I had no role in making decisions regarding what to disclose," Geithner testified at a hearing held by the House Oversight Committee Wednesday.

New York Fed officials instructed AIG not to disclose more than a dozen controversial transactions to the Securities and Exchange Commission in November 2008. At the time, Geithner was the president of the New York Fed but he said he had recused himself from the day-to-day operations at that time because of his nomination to be Treasury secretary.

At least two lawmakers weren't buying Geithner's denial.

"He has asserted complete ignorance of the Fed's efforts to cover up the bailout details," said Committee Ranking Member Darrell Issa, R-Calif. "Many Americans, including members of this Committee, have a hard time believing that Secretary Geithner entered an absolute cone of silence on the day that his nomination was announced."

Another Republican lawmaker, Rep. John Mica of Florida, also said he did not believe Geithner's testimony and called for his head.

"Why shouldn't we ask for your resignation?" Mica asked Geithner. "We're not getting the whole story, we're getting the blame story. You're either incompetent on the job or you knew what was taking place and you tried to conceal it, and I think that's grounds for your review."

Geithner angrily responded to Mica, "You don't know me very well." He then more calmly said, "That is your right to have that opinion. I have served my country as carefully and ably as I can."

AIG's bailout has incited furor among lawmakers and the public, as the troubled insurer has come to symbolize the corporate greed, risky behavior and lack of regulation that many believe caused the Great Recession.

The issue at hand on Wednesday was one of the most contentious: a decision by the New York Fed to pay counterparties 100 cents on the dollar for the underlying assets that AIG has insured through so-called credit default swap agreements. As a result, $62.1 billion of taxpayer and AIG funds were essentially funneled to 16 banks that were counterparties to AIG insurance contracts.

Committee Chairman Edolphus Towns, D-N.Y., called the facts of the case "murky."

"The circumstances surrounding the payments to the counterparties has created an air of suspicion and distrust among the American people, starting with the New York Fed's initial refusal to name the counterparties," Towns, D-N.Y., said at the hearing. "The New York Fed argued that disclosing the counterparties would somehow injure AIG. In fact, when the information was finally released under pressure from Congress, nothing happened."

Former Treasury Secretary Henry Paulson, Special Inspector General for the $700 billion bailout Neil Barofsky and the lead attorneys for the New York Fed and AIG are also slated to testify at Wednesday's hearing.

Federal Reserve Chairman Ben Bernanke, who is not testifying Wednesday, said in a letter that he was also not involved in any decision regarding disclosures.

In November, SigTARP Barofsky released an audit of the New York Fed's decision that found the regulator failed to use its clout to negotiate concessions from AIG's business partners.

The House Oversight Committee, subpoenaed the New York Fed for the documents Barofsky used in his audit and recently received 250,000 pages of e-mails and other correspondence. The documents reveal that the New York Fed had urged AIG not to make any reference in its SEC filing that the counterparties had received the dollar-for-dollar value.

Geithner defended his decision to offer full-value for the underlying assets on the credit default swaps. But regarding any decision not to disclose those transactions, Geithner argued that he had had no involvement because of his nomination as Treasury secretary.

"On Nov. 24, President-elect Barack Obama announced that he intended to nominate me to be Secretary of the Treasury," Geithner testified.

"Starting on Nov. 24, I withdrew from involvement in monetary policy decision, policies involving individual institutions, and day-to-day management of FRBNY."

One day later, on Nov. 25, the subpoenaed New York Fed documents show that AIG began to prepare its report with the SEC.

Despite his stated lack of involvement, Geithner was adamant that those who were involved "acted solely in the public's interest," adding that they were "never involved in any decision for any private benefit."

Due to many New York Fed employees' ties to Wall Street investment banks - including Geithner - many lawmakers and members of the public have implied that the regulator's decisions may have been made for personal gain.

"I think your commitment to Goldman Sachs trumped your commitment to the American people," said Rep. Steven Lynch, D-Mass.

Filed under: Timothy Geithner
soundoff (43 Responses)
  1. Donald

    There is a saying, "A thief never like to see another thief carries a long bag". Well, when some people always try to find ways of covering up their actions as are many of the politicians in Washington, they thinks that everyone else is as unscrupulous. Timothy Geithner may very well be telling a lie or he may very well be telling the truth. So, from my perpective; If I was nominated to be the next Treasury Secretary, the most honorable thing to do, would be for me to recuse myself from the day to day decision making so that there would be no conflict of interest once I become the Treasury Secretary. I therefore think that for the committee members to say that Mr. Geithner is lying is not an appropriate stance. A person is innocent until proven guilty. Let the facts be determine then make your judgment House Oversight Committee members.

    January 27, 2010 01:41 pm at 1:41 pm |
  2. Ken

    Little Tim was busy not paying his taxes.

    January 27, 2010 01:45 pm at 1:45 pm |
  3. Lelia

    Oh Pleezzzze! Every single time Mr. Geithner appears in public he looks like a deer caught in the headlights. His physical demeanor and body language shouts, "GUILTY" in double-capital letters. Anyone with a brain who has researched his and Bernanke's backgrounds knows he is knee-deep in the political horse manure pile. He is an Obamanite and he and Bernanke need to just get out of Dodge and they need to take the rest of the outlaw gang who are in the White House Hideout along with them.

    January 27, 2010 01:48 pm at 1:48 pm |
  4. LacrosseMom(the real one)

    Historical Reminder:

    On September 16th 2008, Sec. of Treasury Hank Paulson & President George W. Bush bailed out AIG with ........ $85 BILLION from the Taxpayers.

    Why isn't Congress questioning Hank Paulson or Mr. Bush?

    January 27, 2010 01:49 pm at 1:49 pm |
  5. ConsiderThis-FL

    Everybody is trying to blame someone else for the mess that we (Americans) find ourselves in. I have news for you; we're all to blame. Why? Because (1) money is our god, (2) we elect multi-millionaires and billionaires to positions of power and these people don't give a rat's @#* about people who aren't rich, (3) we passively stand by and allow special interest to buy our government (thanks Supreme Court!), (4) we keep re-electing people to office who have proven time and time again that they're career polititians for the sole purpose of serving themselves and not the American people (except for their rich friends, of course), (5) we allow ourselves to be easily pacified through entertainment (The Grammy Awards, Golden Globes, Academy Awards, etc., etc where the rich lavish praise on themselves), (6) and we stay in a state of constant political confusion holding on to endless hope that our government, and the officials that we elect, will "do the right thing by the people." Well, forget-a-bout-it." We are a nation of money worshipping criminals (every activity of normal life has been criminalized in some way, form, or fashion); so now we just have to live with the way of life that we've created for ourselves. So, don't blame President Obama. Don't blame congress. Don't blame Geithner. Don't blame wall street. Blame yourself; because chances are, if you have the opportunity to take advantage of the country for personal gain, you'd probably do it too.

    January 27, 2010 02:00 pm at 2:00 pm |
  6. Andy from NYC

    This guy could easily pass for the "Joker" in "Batman" features.

    January 27, 2010 02:00 pm at 2:00 pm |
  7. ATR

    What are these hearing about? It seems like to only thing accomplished is Congressional grandstanding. 250,000 emails and documents should give them enough evidence to determine whether Gietner was involved in the non-disclosure. Evidently there is none. Geitner confirms he was not involved; the timeline backs him up. If these idiots don't have evidence to the contrary then STFU.

    January 27, 2010 02:07 pm at 2:07 pm |
  8. tpbco

    Yep, and his TAX EVASION was an honest mistake.

    You have to believe him, he wouldn't lie, would he?

    Hollywood couldn't make something this ridiculous up.

    January 27, 2010 02:07 pm at 2:07 pm |
  9. H R Mickelson

    I wonder what happens when you leave the foxes guard the hen house? Are we really that stupid that we don't know the answer to this question and then do something about it.

    January 27, 2010 02:09 pm at 2:09 pm |
  10. Tim

    And if anyone knows how to lie about their involvement in something untoward, it's tax cheat Geithner.

    January 27, 2010 02:22 pm at 2:22 pm |
  11. Bob Allen

    This guy came into office as a tax cheat. Can we expect him to tell the truth?

    January 27, 2010 02:36 pm at 2:36 pm |
  12. Mike Syracuse, NY

    Just par for the course for the most 'open and transparent' regime in our history.

    January 27, 2010 02:37 pm at 2:37 pm |
  13. Mark

    Yea right, he also didn't cheat on his taxes, it was the fault of TurboTax.

    I hope our new president in three years will appoint honest people.

    January 27, 2010 02:38 pm at 2:38 pm |
  14. Fair is Fair

    Kind of makes you wonder if Dodd really did put the AIG bonus language in the bailout at the behest of Treasury like he said. Hmmmm... scandal, anyone? Looks like old Doddie either got thrown under the bus or took one for the team.

    Get rid of all of them.

    January 27, 2010 02:39 pm at 2:39 pm |
  15. dave

    The guy can't even remember to pay taxes so how can anyone expect him to remember anything else?

    January 27, 2010 02:41 pm at 2:41 pm |
  16. Hugo

    Just some more of , what the meaning of is, is....
    Geithner and Bernanke were primary architects of our collapsed economic system, so hey let's have Obama give them more power, it's the American way! Dumb arses that couldn't even do their own taxes!

    January 27, 2010 02:41 pm at 2:41 pm |
  17. Enough

    Sure we're going to believe anything this lying tax cheat has to say. Turbo tax Tim at his best!

    January 27, 2010 02:54 pm at 2:54 pm |
  18. Biased

    Weren't the likes of the Presidents of other companies (Enron Anderson, etc. head of.GM, weren't they all held responsible for the failures or actions of their companies? Weren't we told it wasn't good enough for them to say they weren't aware of all the goings on in their companies? So why is it someone who is President, doesn't pay his own taxes, gets appointed to look after America's money yet now wants to be absolved from all responsibilities in this fiasco of a big coverup? Sad thing is he will probably get away with everything because he is a democrat.

    January 27, 2010 02:58 pm at 2:58 pm |
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