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Geithner Backstairs Intrigue Awarded $13 Billion Directly to Goldman Sachs, Merrill Lynch (RIP), Société Générale and Deutsche Bank
Here's something Goldman
Sachs, Treasury Secretary Tim Geithner, Federal Reserve Chairman
Ben Bernanke, American International Group's former CFO, and
Goldman's former chairman have all declined to comment on:
While negotiating how much loss large banks would have to take on credit default swaps with the bankrupt insurer AIG, the New York Fed, then under Geithner, rejected a 40 cents-on-the-dollar deal in the works and made taxpayers pay at least $13 billion to ensure the banks suffered no losses:
Geithner’s team circulated a draft term sheet outlining how the New York Fed wanted to deal with the swaps -- insurance-like contracts that backed soured collateralized-debt obligations.
CDOs are bundles of debt including subprime mortgages and corporate loans sold to investors by banks.
Part of a sentence in the document was crossed out. It contained a blank space that was intended to show the amount of the haircut the banks would take, according to people who saw the term sheet. After less than a week of private negotiations with the banks, the New York Fed instructed AIG to pay them par, or 100 cents on the dollar. The content of its deliberations has never been made public.
The New York Fed’s decision to pay the banks in full cost AIG -- and thus American taxpayers -- at least $13 billion. That’s 40 percent of the $32.5 billion AIG paid to retire the swaps. Under the agreement, the government and its taxpayers became owners of the dubious CDOs, whose face value was $62 billion and for which AIG paid the market price of $29.6 billion. The CDOs were shunted into a Fed-run entity called Maiden Lane III.
Full, excellent story by Bloomberg's Richard Teitelbaum and Hugh Son.
I'm not sure this stuff counts as an outrage anymore. After all, $13 billion is range-finding to these guys. Maybe 2009 1040 forms should have a special checkbox to send a strippergram to Geithner to thank him for saving us so much money.
|10.27.09 @ 4:28PM|#
Dear Mr. Geithner
I am facing a substantial loss on one of my assets, a 1993
Mazda 323 a major auto industry investment. If you could just
give me $20 thousand billion to support this investment, I
could avoid a major writedown and insolvency.
Please forward the funds ASAP.
Yours,
Aresen
|10.27.09 @ 4:36PM|#
So in return for LARGE CAMPAIGN CONTRIBUTIONS to Obama (a man whose philosophy Wall Street should hate), the big banks get a 13 BILLION dollar PAYOFF.
Let's face it. They "bought" the Administration for pennies on the dollar.
If the recipient had been McCain ... .
Br'er Rabbit|10.27.09 @ 5:20PM|#
Actually Bush was still President when they got the 35 Billion tax payer dollars via AIG.Geithner was at the NY Fed under Bush so it's ALL BUSHES FAULT!!! on this one anyways.
|10.27.09 @ 4:37PM|#
No, no, no, Aresen, that's not how you do it. You need an attorney:
Dear Mr. Geithner
I am facing a substantial loss on one of my assets,a 1993 Mazda 323a major auto industry investment. If you could just give me $18$20 thousandbillion to support this investment, along with $2 billion for my attorney, I could avoid a major writedown and insolvency.
Please forward the funds ASAP.
Yours,
Aresen's Attorney
|10.27.09 @ 4:37PM|#
This really isn't much of a surprise, since Tim Geithner is secretly employed by Goldman Sachs.
|10.27.09 @ 4:55PM|#
This really isn't much of a surprise, since Tim Geithner is
secretly employed by Goldman Sachs The Illuminati.
FTFY
|10.27.09 @ 4:38PM|#
Socialism for the rich and well connected is still socialism, and arguably more damaging than socialism for the poor. We can't tell the poor it's a bad idea while we shovel buckets full of money into the hands of the very wealthy.
|10.27.09 @ 4:42PM|#
This isn't socialism. I'm starting to think a return to the gold standard and the ending of the federal reserve system would be a good idea. Timmy Turbo Tax should be run out of town on a fucking rail but he of course will make a fortune on the lecture circuit, lying about his financial derring-do. There's no justice.
|10.27.09 @ 4:42PM|#
You know this pisses me off a lot more than any welfare for poor people possibly could. At least with food stamps, Section 8 vouchers, etc some of the benefit is going to kids who did nothing to create their parents' situaiton. But the whole banking bailout is obscene. And BHO's rhetorical jabs at Wall Street are just a joke. In public he excoriates them but behind closed doors the bailout gets done in exchange for campaing contributions.
The Man|10.27.09 @ 6:09PM|#
Absolutely. I'm always leery of guys who look like they have to rent their dates. What other nasty habits do they have?
Xeones|10.27.09 @ 4:50PM|#
Seriously, does anyone else have an urge to just punch Geithner apart? Or at least let Warty bend him in half for a few hours?
|10.27.09 @ 5:03PM|#
And what are the differences between "corporatism" and socialism?
Hardly a one. Giving people handouts from the taxpayers IS socialism, regardless of whether the people in question live in a shack or a mansion.
|10.27.09 @ 5:19PM|#
I'd say the end result is not much different, just the grabbing hands that grab all they can, but the devil is in the details.
mark|10.27.09 @ 4:53PM|#
And this is like, how do you say, huge scandal? How is Teflon Barack going to slide past this?
|10.27.09 @ 5:01PM|#
Hilarious, Mark.
This story will never make it out of the business news ghetto. Oh, maybe Fox will pick it up, but you know, they're just a bunch of partisan ranters, not a Real News Organization, so who cares?
dfd|10.27.09 @ 7:36PM|#
True. It's a sad commentary on the state of the media and the public in general that Obama whining about a few million in salaries and bonuses (sure to play well with his sycophants) gets prime-time attention while billions in payoffs to his campaign contributors won't make it off of Bloomberg news.
Br'er Rabbit|10.27.09 @ 6:20PM|#
And this is like, how do you say, huge scandal? How is Teflon Barack going to slide past this?
Legacy of the Bush Administration.
RTFA
Br'er Rabbit|10.27.09 @ 6:21PM|#
And this is like, how do you say, huge scandal? How is Teflon Barack going to slide past this?
Legacy of the Bush Administration.
RTFA
Cliché Bandit|10.27.09 @ 4:59PM|#
There is such a thing as a Stripergram? AWESOME! I am going to send myself one right now.
"Oh, so your in medical school. Let me help with your tuition."
Slut Bunwalla|10.27.09 @ 5:12PM|#
I don't want to know about Geithner's "Backstairs Intrigue", thanks.
|10.27.09 @ 5:16PM|#
I should be feeling outraged but I've got nothing left. The politicians have finally figured out the magic formula: do so much so fast so big and we must must do it now...and they can get away with anything.
|10.27.09 @ 5:19PM|#
We need a cooling off period for government action. "Whoa, hoss, spend a few days thinking about that one, okay?"
|10.27.09 @ 5:23PM|#
Can't--won't--someone sue the government for this shit? I guess since they passed a law essentially making it legal, there's nothing to sue about, but can't someone stir some shit at least? I'll contribute.
|10.27.09 @ 5:48PM|#
A constitutional amendment granting taxpayers standing to sue the feds over disbursement of money inconsistent with statute would be a start.
And yes, I am serious.
|10.27.09 @ 11:53PM|#
I agree. It's a big hole in the constitution that nobody has legal standing to challenge the legality of any spending item.
There should be at least some mechanism for bringing a class action lawsuit against the government for misuse of funds from the public treasury.
The Man|10.27.09 @ 6:16PM|#
What about covert corruption? Maybe an amendment to make law-breaking illegal?
Corduroy Rocks|10.27.09 @ 5:24PM|#
Rat bastards.
Rat f'ing bastards.
Where the hell is the supposed "real" media on this?
It's outright, bold-faced, thievery.
¢|10.27.09 @ 5:24PM|#
Obama (a man whose philosophy Wall Street should hate)
Why? He's insufficiently anti-free-market?
|10.27.09 @ 5:27PM|#
A) It's more outrageous when you realize that what Goldman Sachs was insuring was something with a flexible market value - which they insured at the top of the market. (Much as if I insured my house against a drop in the market back in 2006, and then got the taxpayers to bailout my insurance company so I could get 100% of the 2006 value of my house.)
B) Now, start thinking about the NAKED swaps.
C) Two words: "Double Indemnity".
|10.27.09 @ 6:10PM|#
Now, start thinking about the NAKED swaps.
Naked swapping is never far from my mind, Hazel.
Paul|10.27.09 @ 7:55PM|#
rejected a 40 cents-on-the-dollar deal in the works and made taxpayers pay at least $13 billion to ensure the banks suffered no losses:
Everything I know about economics, I learned from the Lone Biker of the Apocalypse.
Price, it's not what you say it is, it's what the market will bear.
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