BANKERGATE: Treasury Secretary Timothy Geithner is a Financial Terrorist

Ed A. Tor — Tue, 12 Jan 2010 03:38:00 +0000

First it was Climategate, then it was Underwear Bombergate and now it is Bankergate. I have long suspected that Timothy Geithner was a Financial Terrorist, and it now seems that my suspicions are being proven correct.

Recently released emails show that this slimy piece of excrement has been implicated in a scandal that is sure to send Washington into a tizzy. I suspect that one of two things will happen: 1) The White House will go into lock-down mode while they come up with some bullshit strategy to make Geithner look like a victim, or if there is no getting out of it, Obama Inc. will throw him to the wolves.

If he is thrown to the wolves Obama will end up pardoning him if he is found guilty. You can take that to the bank! Also Paulson is part of this equation to. He is just as big of a Financial Terrorist as Geithner and his day his coming. Ditto for Lloyd Blankfein. Tell me something Lloyd is this still God’s work? Karma’s a bitch eh matey!

From Bloomberg.com

Geithner’s Fed Told AIG to Limit Swaps Disclosure (Update3)

By Hugh Son

Jan. 7 (Bloomberg) — The Federal Reserve Bank of New York, then led by Timothy Geithner, told American International Group Inc. to withhold details from the public about the bailed-out insurer’s payments to banks during the depths of the financial crisis, e-mails between the company and its regulator show.

AIG said in a draft of a regulatory filing that the insurer paid banks, which included Goldman Sachs Group Inc. and Societe Generale SA, 100 cents on the dollar for credit-default swaps they bought from the firm. The New York Fed crossed out the reference, according to the e-mails, and AIG excluded the language when the filing was made public on Dec. 24, 2008. The e-mails were obtained by Representative Darrell Issa, ranking member of the House Oversight and Government Reform Committee.

The New York Fed took over negotiations between AIG and the banks in November 2008 as losses on the swaps, which were contracts tied to subprime home loans, threatened to swamp the insurer weeks after its taxpayer-funded rescue. The regulator decided that Goldman Sachs and more than a dozen banks would be fully repaid for $62.1 billion of the swaps, prompting lawmakers to call the AIG rescue a “backdoor bailout” of financial firms.

“It appears that the New York Fed deliberately pressured AIG to restrict and delay the disclosure of important information,” said Issa, a California Republican. Taxpayers “deserve full and complete disclosure under our nation’s securities laws, not the withholding of politically inconvenient information.”

Geithner Had ‘No Role’

“Secretary Geithner played no role in these decisions,” Meg Reilly, a Treasury spokeswoman, said in an e-mail. “He was recused from working on issues involving specific companies, including AIG,” after his nomination for Treasury secretary on Nov. 24, 2008. Geithner “began to insulate himself weeks earlier in anticipation of his nomination,” she said in a separate statement.

Geithner, who was tapped by President Barack Obama, took the Treasury job in January, 2009. Mark Herr, a spokesman for New York-based AIG, declined to comment.

Issa requested the e-mails from AIG Chief Executive Officer Robert Benmosche in October after Bloomberg News reported that the New York Fed ordered the crippled insurer not to negotiate for discounts in settling the swaps. The decision to pay the banks in full may have cost AIG, and thus taxpayers, at least $13 billion, based on the discount the insurer was seeking.

The e-mail exchanges between AIG and the New York Fed over the insurer’s disclosure of the transactions show that the regulator pressed the company to keep details out of the public eye. Issa’s comments add to criticism from Republican lawmakers, including Senator Chuck Grassley of Iowa and Representative Roy Blunt of Missouri, who wrote letters in the past two months demanding information from Geithner, 48, about the costs of the AIG bailout.

E-mail ‘Troubling’

Barney Frank, a Massachusetts Democrat and chairman of the House Financial Services Committee, said the e-mail exchanges were “troubling” and that he supports holding congressional hearings to review them.

AIG’s Dec. 24, 2008, filing was challenged privately by the U.S. Securities and Exchange Commission, which polices the adequacy of disclosures by publicly traded firms. The agency said in a letter to then-CEO Edward Liddy six days later that AIG should provide a Schedule A, which lists collateral postings for the swaps and names the bank counterparties that purchased them from the company. The Schedule A was disclosed about five months later in a filing.

Securities Lawyers

“Our position has always been that if AIG’s securities lawyers determine that AIG is legally obligated to make a particular filing or disclosure, then that is what AIG must do,” Thomas Baxter, general counsel for the New York Fed, said in a statement. He said it was appropriate for the New York Fed, as party to deals outlined in the filings, “to provide comments on a number of issues, including disclosures, with the understanding that the final decision rested with AIG’s securities counsel.”

Kathleen Shannon, an AIG deputy general counsel, wrote to the insurer’s executives in a March 12, 2009, e-mail about the conflicting demands from the New York Fed and SEC.

“In order to make only the disclosure that the Fed wants us to make,” Shannon wrote, “we need to have a reasonable basis for believing and arguing to the SEC that the information we are seeking to protect is not already publicly available.”

Deutsche Bank

Under pressure from lawmakers, AIG disclosed the names of the counterparties, which included Deutsche Bank AG and Merrill Lynch & Co., on March 15. The disclosure said AIG made more than $27 billion in payments without identifying the securities tied to the swaps or listing the value of individual purchases by each bank, details the Fed wanted to keep out, according to the March 12 e-mail from AIG’s Shannon.

Earlier that month, Fed Vice Chairman Donald Kohn testified to Congress that disclosure of the counterparties would harm AIG’s ability to do business. The insurer agreed to turn over a stake of almost 80 percent in connection to its bailout.

The e-mails span five months starting in November 2008 and include requests from the New York Fed to withhold documents and delay disclosures. The correspondence includes e-mails between AIG’s Shannon and attorneys at the New York Fed and its law firm, Davis Polk & Wardwell LLP. Tom Orewyler, a spokesman for Davis Polk in New York, declined to comment as did Shannon.

According to Shannon’s e-mails obtained by Issa, the New York Fed suggested that AIG refrain in a filing from mentioning so-called synthetic collateralized debt obligations, which bundled derivative contracts rather than actual loans.

‘No Mention of the Synthetics’

The filing “reflects your client’s desire that there be no mention of the synthetics in connection with this transaction,” Shannon wrote to Davis Polk on Dec. 2, 2008. “They will not be mentioned at all.”

AIG had about $9.8 billion of swaps protecting the synthetic holdings as of September 2008, the company said on Dec. 10, 2008. Goldman Sachs said in a press release last month that it was among banks that had losses on synthetic CDOs.

As part of a bailout that swelled to $182.3 billion, AIG and the Fed created Maiden Lane III, a taxpayer-funded facility designed to remove mortgage-linked swaps from the insurer’s books. Shannon told the New York Fed on Nov. 24, 2008, that AIG executives wanted to publicly disclose details about Maiden Lane the next day.

“Do you think it might be feasible to hold off on the Maiden Lane III 8K and press release until next week?” Brett Phillips, a New York Fed lawyer wrote in an e-mail that day. “The thinking is that the Maiden Lane III closing will be a less transparent event, and it might be better to narrow the gap between AIG’s announcement and the New York Fed’s publication of term sheet summaries.”

‘Guided By Your Counsel’

“Given the significance of the transaction, AIG would be best served by filing tomorrow,” Shannon wrote. “We will of course be guided by your counsel.” The document outlining the Maiden Lane agreement was posted on Dec. 2, 2008.

In at least one instance, AIG pushed for documents to be disclosed and then released the information.

“We believe that the agreements listed in the index (i.e., the Master Investment and Credit Agreement and the Shortfall Agreement) do not need to be filed,” Peter Bazos, a Davis Polk lawyer wrote on Nov. 25, 2008. “Please let us know your thoughts in this regard.”

AIG’s Shannon replied that “the better practice and better disclosure in this complex area is to file the agreements currently rather than to delay.” The agreements were included in the Dec. 2 filing.

More details of the negotiations over swaps payments emerged in November 2009 when Neil Barofsky, the special inspector in charge of policing the Troubled Asset Relief Program, assessed the Fed’s role in the bailout.

‘Entitled to Know’

“Federal Reserve officials provided AIG’s counterparties with tens of billions of dollars they likely would have not otherwise received,” Barofsky wrote in a Nov. 17 report. “The default position, whenever government funds are deployed in a crisis to support markets or institutions, should be that the public is entitled to know what is being done with government funds.”

The New York Fed may eventually recoup its loan to Maiden Lane III, the vehicle that obtained CDOs from the banks after paying to cancel the swaps, Barofsky wrote. According to a New York Fed report, the value of securities and cash held in Maiden Lane III climbed 4.5 percent to $23.5 billion in the three months ended Sept. 30.

AIG’s first rescue was an $85 billion credit line from the New York Fed in September 2008. The bailout was expanded three times and is valued at $182.3 billion. That includes a $60 billion Fed credit line, an investment of as much as $69.8 billion from the Treasury and up to $52.5 billion for Maiden Lane facilities to buy mortgage-linked assets owned or backed by the company.

To contact the reporter on this story: Hugh Son in New York at hson1@bloomberg.net

From Prison Planet.com:

Steve Watson
Prisonplanet.com
Monday, Jan 11, 2010

Explosive emails released last week could see Treasury secretary Timothy Geithner become embroiled in criminal charges for his role in a cover up that exposes the monumental criminality behind the $182.3 billion bailout of American International Group Inc.

In November and December 2008, The Federal Reserve Bank of New York instructed the bailed out AIG to hide from the public details regarding payments the insurance giant made to banks, including Goldman Sachs Group Inc. and Societe Generale SA.

Using Fed secured taxpayer bailout money, AIG paid several banks 100 percent of the face value of credit-default swaps, as other financial institutions were negotiating deep discounts for the unregulated paper assets that do not have to be backed by cash.

The decision to pay the banks in full may have cost AIG, and therefore taxpayers, at least $13 billion over the odds.

The “backdoor bailout” of the banks, as it has been dubbed was exposed in March 2009 after the SEC challenged AIG’s filing, however, e-mails obtained by Representative Darrell Issa, ranking member of the House Oversight and Government Reform Committee, have re ignited the situation as they conclusively expose a collusion between AIG and the Fed to deceive the public.

The e-mails between company and regulator, released last Thursday, show that The New York Fed crossed out reference to the payments and that AIG also omitted the details when the Securities and Exchange Commission filing was made public on Dec. 24, 2008.

The emails, the content of which are highlighted in this Bloomberg News article, also show that the Fed wanted numerous other details about the AIG bailout withheld or delayed from public oversight.

“It appears that the New York Fed deliberately pressured AIG to restrict and delay the disclosure of important information,” said Issa, a California Republican. Taxpayers “deserve full and complete disclosure under our nation’s securities laws, not the withholding of politically inconvenient information.”

Despite denials from the Treasury and the New York Fed that Geithner was involved in the scandal, as the President of the New York Fed at the time, his head now rests firmly on the chopping block where he awaits his fate.

Issa is seeking more information from the New York Fed on the matter, following the statements of general counsel Thomas Baxter, who declared in a letter in defense of Geithner Friday “In my judgment, as the New York Fed’s chief legal officer, disclosure matters of this nature did not warrant the attention of the president.”

“It’s a staggering admission by Mr. Baxter that he felt strong enough that Secretary Geithner wanted him to limit AIG’s disclosures on counterparty payments to the SEC that he says he didn’t even feel a need to bring the details to his boss’ attention,” Issa said in a statement. “This letter raises more questions on the inner-workings of the New York Fed during one of the most pivotal periods in our nation’s history.”

Geithner’s extensive connections to Goldman Sachs also raise serious questions, given that the investment bank directly profited from the AIG payments.

Geithner’s predecessor and Treasury Secretary at the time all of this unfolded, Hank Paulson, also once served as Chairman and Chief Executive Officer for Goldman Sachs, after working for the firm for decades.

Paulson rammed through the bailout of AIG with threats of financial armageddon and physical martial law, claiming he “felt the pain of AIG”, comments for which he was slammed by Republican Congressman Cliff Stearns earlier this year.

AIG’s outstanding debts to Goldman Sachs meant that $13 billion of the money handed over to AIG by Paulson went directly to Goldman Sachs.

Meanwhile, Bear Stearns and Lehman Brothers — both investment banks in direct competition with Goldman Sachs — were not bailed out when bad debt forced them to cease operating under the same circumstances as AIG.

Congressman Stearns pressed Paulson on his conflicts of interest, stating, “Isn’t there some point where you say hey, I’ve got a conflict of interest here, you don’t feel any kind of scintilla of ethics on this thing at all?” Paulson responded by claiming that he got a waiver from the ethics agreement.

Click here to view the embedded video.

Paulson’s appointment, at the height of the financial crisis, of ex-Goldman Sachs executive Neel Kashkari to oversee the distribution of bailout monies also highlights the vast conflict of interest surrounding this scandal.

As the New York Times reported earlier this year, Goldman Sachs effectively bailed itself out. Since that time the bank has been making record profits on trading and now completely dominates the program trading market.This blatantly criminal activity has led to Goldman being labeled “Financial Terrorists” by analysts.Even Rolling Stone magazine has exposed Goldman Sachs’ persistent role in steering and manipulating the economy over the last century.

At the time of the bailout we warned that the so called financial saviours represented nothing more than the old guard of the corporate elite, the very people responsible for the financial crisis in the first instance.

Judge Andrew Napolitano, appearing on Shepard Smith’s Fox News show last week, stated that he believes Geithner could face a criminal probe:

Click here to view the embedded video.

Barney Frank, a Massachusetts Democrat and chairman of the House Financial Services Committee, said the e-mail exchanges were “troubling” and that he plans to hold congressional hearings on the matter.

Watch Alex Jones breakdown “bankergate” in detail:

Click here to view the embedded video.

The Telecrap Urinal » AIG

BANKERGATE: Treasury Secretary Timothy Geithner is a Financial Terrorist