A brutal report issued Monday by a government watchdog holds Timothy Geithner -- then the head of the Federal Reserve Bank of New York and now the nation's Treasury Secretary -- responsible for overpayments that put billions of extra tax dollars in the coffers of major Wall Street firms, most notably Goldman Sachs.So Geithner chose not to use his "considerable leverage", and instead used taxpayer money to fully reimburse Wall Street for the bad bets they made with AIG. While that level of incompetence is pretty stunning, let's also not forget how makes sense in Geithner/Summers/Bernanke's bizzaro world of how to fix the economy. Atrios:
The authoritative new narrative describes how, while bailing out insurance giant AIG last fall, a team led by Geithner failed nearly every step of the way.
Instead of bargaining with AIG's numerous counterparties to resolve its billions of dollars in souring derivatives contracts, Geithner's team ended up paying top dollar for toxic assets -- "an amount far above their market value at the time," the report notes.
"There is no question that the effect of FRBNY's decisions -- indeed, the very design of the federal assistance to AIG -- was that tens of billions of dollars of Government money was funneled inexorably and directly to AIG's counterparties," the Office of the Special Inspector General for the Troubled Asset Relief Program said.
Wall Street firms like Goldman Sachs, Merrill Lynch and Wachovia got full value for their derivatives contracts with AIG, and taxpayers got the bill. In total, $27.1 billion of public money was transferred to companies that did business with AIG.
Throughout the bailout of AIG, the report says, the New York Fed failed to develop appropriate contingency plans; failed to properly assess the impact of its decisions; and generally engaged in negotiation strategies that were doomed to fail.
Basically what Bernanke and gang have done is drop a bunch of money from helicopters into the big banks in various ways, the idea being that if they have lots of money sloshing around they will perform their role of efficiently allocating capital by lending at appropriate rates for appropriate projects. Of course our banking system has demonstrated in recent years that the idea that it allocates capital efficiently is a complete joke.Botching the AIG bailout should be enough reason for Geithner to lose his job, but then again it clearly doesn't bother Obama since this was known when he hired him in the first place.
Unemployment numbers won't turnaround until the banks are cleared of their toxic assets, and that won't happen in any sane way as long as their BFFs Geithner and Summers are calling the shots. The stimulus is currently saving us from catastrophe, but when that starts to run out at some point around the 2010 elections... shit will not be pleasant.
that geithner, he's absolutely incorrigable.
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