Posts Tagged ‘AIG’

Geithner and Bernanke: Laundering Money Through an Illegal Trust?

February 3, 2010

Frank Gaffney

Big Government

Wednesday, February 3, 2010

This afternoon on Secure Freedom Radio we announced a breaking news story concerning the Administration’s ongoing cover-up of AIG financial wrong-doing.  In an interview with David Yerushalmi, senior litigator on the Murray v. Geithner et al lawsuit, we expose possible fraud, money-laundering and criminal activity.

As Yerushalmi says in the interview, “So here’s what we find out in the midst of discovery when we depose the Treasury Department’s deponent and the Fed and get documents, here’s what we’ve learned: The Federal Reserve Bank of New York at the time that it structured the debt that it was going to give AIG insisted that not only did it get the debt, not only would it get principal and interest payments and collateral for that, it wanted 80% of AIG, precisely 77.9% of the shares and the voting rights.  But the Federal Reserve Bank and Geithner knew that it was illegal for the Fed system whether there’s a Fed or the Federal Reserve Bank of New York to own that, so what did they do….”

Read the rest – the  transcript and audio of the interview – at Secure Freedom Radio.    Come back for an update tomorrow involving Neil Barofsky, Special Inspector General for TARP….and an animated movie showing exactly how the AIG, Treasury and Federal Reserve scheme worked.

Advertisements

Bailout Recpients Fly Under The Radar While We Remain Exposed

February 2, 2010
Bob Chapman
International Forecaster
Tuesday, February 2nd, 2010
Your assets can be frozen, another reason to hold gold, media requests concerning AIG rescue blocked, China trying to adjust the heat, Bernanke reappointed, Paul Volcker reappears, foreclosures and unemployment still a concern, jump in credit default swaps, airline passenger traffic now flying low.

In the past quarter Verizon eliminated 7,413 jobs to net 222,927.

The SEC now allows money market funds to suspend redemptions, freezing your assets. That rule is designed to push inventors out of money market funds and into US Treasuries and Agency bonds. Anyone whoever had any doubts about the worth of government securities has to now be convenienced that their money should be in gold and silver assets. This is the only way to preserve wealth.

Goldman Sachs Group Inc., one of the biggest recipients of funds from the U.S. bailout of American International Group Inc., was seen by the public as favored by regulators, according to an internal Federal Reserve Bank of New York e-mail.

The public perception was a reason to reject a December 2008 media request for the names of securities purchased from banks during AIG’s rescue, according to the e-mail released yesterday. If the names of the assets were released, the banks, including Goldman Sachs, would be identified as beneficiaries, New York Fed employee Danielle Vicente wrote in the Dec. 4, 2008, e-mail to Fed counsel James Hennessy.

Public pension funds needing to boost their returns but frustrated with hedge funds and private-equity investments are turning to one of the oldest investment strategies—using borrowed money to boost performance.


// < ![CDATA[
ch_client = "Rob";
ch_type = "mpu";
ch_width = 468;
ch_height = 180;
ch_non_contextual = 4;
ch_vertical ="premium";
ch_sid = "Chitika Premium";
var ch_queries = new Array( );
var ch_selected=Math.floor((Math.random()*ch_queries.length));
if ( ch_selected

The strategy calls for leveraging pension funds’ safest asset—government or other high-grade bonds— while reducing exposure to stocks.

The State of Wisconsin Investment Board, which manages $78 billion, became among the first to adopt the strategy when it approved the plan Tuesday. The fund will borrow an amount equivalent to 4% of assets this year, and as much as 20% of its assets over the next three years.

*****

California Teachers Pension Fund $42.6 Billion Short

http://www.bloomberg.com/apps/news?pid=20601103&sid=a0jlaf2T3tW0

*****

The world and particularly the US, received some bad news last week. The new purported engine of recovery, China, is trying desperately to take the intense heat out of its economy, after pouring $1.8 trillion into it over the span of just nine months. In today’s world no economy can bail out the world, as the US was once able to do.

The world occasionally can produce some surprising events and one such event was the election of Scott Brown to the Senate. A Republican winning in a Democratic state where that seat had been held by the Kennedy’s since 1953. That deprived the Democrats and those who control them a staggering blow. The Democrats now have a majority of 59 votes, which means without the help of Republicans they and the President are lame ducks on almost all issues.

The President had held off his “State of the Union” address hoping his showpiece legislation, medical reform, would have been passed. That was not to be, so finally January 27th was chosen in desperation. It just happened to be the same day Secretary of the Treasury faces Congress due to his and the Federal Reserve’s criminal activity. The President’s speech will now be used as a cover for Little Timmy to hide under. Healthcare is dead and it will be very interesting to see if Mr. Geithner will be criminally charged. Historically, members of the Illuminati never go to jail. They are fined and proceed on their merry way to commit further crimes. At the same time Fed Chairman Bernanke is facing re-appointment. He probably will be re-appointed, but only with the assistance of millions of dollars handed out by the Republican National Committee. It is called purchasing the vote.

At the same time from out of the shadows steps Paul Volcker, who advocates the end of propriety trading by brokerage houses, so that they no longer steal from their customers by front-running them. Nothing as yet has been said about “flash trading,” which is front-running as well, and naked shorting, both of which are illegal, but strangely the SEC refuses to stop. Could it be that the SEC is really working for the large banks, insurance companies and brokerage firms? Even Rep. Barney Frank, who had to speed off to Davos to the Bilderberg, World Economic Forum, is in on the act advocating Fannie Mae and Freddie Mac be abolished and be replaced with a new mortgage system? He has in the planning another taxpayer disaster. Such is life in America today.

The mainline media in America refuses to discuss real inflation numbers, U-6 and the employment birth/death ratio and the spreading sovereign debt crisis. They feel free to talk about Greece, Ireland, Spain, Portugal, Italy and England, but not the United States. No one in America believes unemployment is 10%, just as no one in the UK believes their unemployment is 7.9%. These bogus statistics as wages fall and inflation rises far beyond the official rate. Both the UK and the US will eventually face a sovereign debt crisis. If you can believe it Mr. Melvyn King, governor of the BofE wants to merge G-20 into the IMF to bring monetary reform. The leadership behind the scenes want a one-world currency, but later rather than sooner. In the US they want to squeeze the last bit of profit out of the dollar, as long as it is the world reserve currency.

Last February the Federal Reserve told us that they had swapped currencies with five major nations. We now find out the real figure was $2 trillion. The Fed used the foreign exchange to manipulate the dollar upward and the dollars were used to buy US Treasuries. Those swaps are now going to have to be unwound, the dollar will fall and the Treasuries will engulf the Treasury market. This is a giant event if the currencies are unwound.

The Chicago Fed December National Activity index was minus 0.61, down from November’s minus 0.32. The three-month average moved up a second month to minus 0.61 from minus 0.68. Employment was the biggest downsize contributor at minus .27, down from minus 0.11. Payrolls increased by 4,000 to 85,000. Only 36 indicators of 85 were positive.

The 7-year T-note auction had a bid-to-cover of 2.85 versus an average of 2.62 in the last ten auctions.

Foreclosures are again rising as unemployment and depression takes it toll. The hot areas were Las Vegas 12%, Cape Coral-Ft. Meyers. Fl 11.9% and Merced, CA at 10%.

In this weeks congressional hearings Mr. Henry Paulson was terrified, as he was in his last appearance, and he stammered through looking terribly unprofessional and unknowledgeable. On the other hand, Mr. Geitner looked like an arrogant lying sociopath, which he is.

The Fed returned $46 billion to the Treasury last year. The Fed owes $1.8 trillion in government debt and mortgage related securities, up from $497 billion a year earlier. Their expenses were $6 billion. Only a full audit will tell us what has been really going on.

The latest from the SEC that money market funds can suspend payouts has been put into place to keep these funds from selling Treasuries. Many of these funds are still deep into Agencies and toxic garbage, so they as well do not want this garbage marked to the market.

Home Depot Inc., the world’s largest home improvement retailer, will cut 1,000 US jobs as it shrinks its pool of human resources and construction workers and closes three test stores.

Home Depot will start cutting most of the jobs by the end of the week, Ron Defeo, a spokesman, said yesterday. The positions being eliminated are also in finance and real estate. The company will also add 200 jobs, resulting in a net loss of 800 positions, he said.

Chairman and chief executive Frank Blake announced the reductions in a memo to employees, saying it “makes business sense to consolidate some functions’’ as store construction slows. Defeo provided a copy of the memo.

The job cuts include 150 at its Atlanta headquarters, Defeo said. Stores in Wilson, N.C.; Waveland, Miss.; and Austell, Ga., with 100 employees will close in six to eight weeks, after merchandise is sold, he said.

Verizon Communications Inc., coping with subscriber losses at its fixed-line phone business, plans to cut about 13,000 jobs at the division this year after posting fourth-quarter revenue that missed analysts’ estimates.

Massachusetts regulators have charged Securities America, a broker owned by Ameriprise Financial Inc., with selling $697 million in investments without fully warning investors about the risks involved.

The promissory notes were issued by companies owned by Medical Capital Holdings Inc., which ended up defaulting on $1 billion in obligations in August 2008. Medical Capital is under investigation by the Securities and Exchange Commission for fraud.

Secretary of State William F. Galvin yesterday charged Securities America because he said it placed more than one-third of Medical Capital’s $1.7 billion in notes. That includes $7.2 million in notes sold to 60 Massachusetts investors. Galvin said Medical Capital paid Securities America $26 million in compensation and funded trips for Securities America executives, including vacations at Las Vegas resorts and golfing outings to Pebble Beach in California.

“People invested their life savings, while this dealer hid from them the truth of what they were getting into,’’ Galvin said in a statement. He wants Securities America to reimburse Massachusetts investors for their Medical Capital holdings.

Oregon’s voters approved a $727 million tax increase on businesses and high-income earners, forestalling deeper budget cuts in a shift for a state with a history of defeating levies at the polls.

Oregonians voted to keep taxes enacted by Democratic Governor Ted Kulongoski in July, according to a count of ballots cast by more than half of the state’s registered voters. Measure 66, which raises taxes on households earning $250,000 or more, passed by 54 percent. Measure 67, which increases corporate levies, garnered favor of 53 percent.

Legislators enacted the tax boost last year to help close a $4 billion hole that the U.S. recession opened in the state’s budget. The levies spurred a challenge from foes who gathered enough signatures to force the referendum. By targeting businesses and the wealthy, proponents parried resistance from voters who twice defeated tax increases in the wake of the 2001 recession.

“It’s a go-after-the-rich strategy,” said John Matsusaka, president of the Initiative and Referendum Institute at the University of Southern California in Los Angeles. “It shows that some voters have switched their minds and they’re more likely to go after the rich.”

U.S. securities regulators are abandoning a plan to ban money-market mutual funds from buying anything other than the most highly rated debt after companies said the requirement would hurt the commercial-paper market, three people familiar with the matter said.

The Securities and Exchange Commission will vote today to cut the so-called tier two securities money funds can buy, instead of barring purchases as proposed in June, said the people, who declined to be identified because the agency’s plans aren’t public. Current SEC rules allow funds to invest up to 5 percent of their assets in debt that carries the second-highest rating from Moody’s Investors Service or Standard & Poor’s.

The SEC recommended new rules six months ago to increase the liquidity and stability of money-market funds after the collapse of the $62.5 billion Reserve Primary Fund in 2008 raised concerns about whether the industry could meet investor redemptions during financial panics. The agency changed its proposal after the U.S. Chamber of Commerce, Time Warner Inc. and Comcast Corp. said in comment letters that the ban on lower- rated assets would make it harder for companies to fund payrolls and other short-term expenses through sales of commercial paper.

Traders are buying protection against defaults on sovereign debt at more than five times the rate of company bonds as governments fund ballooning deficits.

The net amount of credit-default swaps outstanding on 54 governments from Japan to Italy jumped 14.2 percent since Oct. 9, compared with 2.6 percent for all other contracts, according to Depository Trust & Clearing Corp. data. European countries led the jump, with the amount of protection on Portugal climbing 23 percent, Spain 16 percent and Greece 5 percent.

Rising use of derivatives to insure against defaults or speculate on government bond prices is spilling over into the corporate debt market, stemming a rally that drove yields to the lowest relative to sovereign benchmarks since December 2007, according to BNP Paribas SA. The global financial system remains “fragile,” with sovereign debt posing a risk to markets, the Washington-based International Monetary Fund said yesterday in its Global Financial Stability Report.

The perception of rising risk “can puncture a country’s ability to access the capital markets,” said Scott MacDonald, head of credit and economics research at Stamford, Connecticut- based Aladdin Capital Management LLC, which oversees $11.9 billion. “Maybe it’s not an end-all be-all indicator. But when these countries get into a position where they need to raise capital, it becomes a confidence game,” he said.

Elsewhere in credit markets, the extra yield investors demand to own corporate bonds instead of Treasuries held at 164 basis points, or 1.64 percentage points, yesterday, Bank of America Merrill Lynch’s Global Broad Market Corporate Index showed. The spread has widened from this year’s low of 160 basis points on Jan. 14.

Airline passenger traffic fell the most ever last year and a recovery in demand in recent months has yet to translate into higher fares, the International Air Transport Association said.

Traffic, a measure of passengers flown multiplied by distance travelled, dropped 3.5 percent, with declines exceeding 5 percent in Europe, North America and the Asia-Pacific region, IATA, which represents 230 carriers, said in a statement today.

“The industry starts 2010 with some enormous challenges,” Giovanni Bisignani, the organization’s chief executive officer, said in a statement. “Revenue improvements will be at a much slower pace than the demand growth that we are starting to see. Profitability will be even slower to recover.”

While yields, or revenues per passenger, have begun to improve after airlines slashed capacity, they’re still 5 to 10 percent below 2008 levels, IATA said. That suggests airlines are struggling to raise fares even as demand begins to pick up.

The recession and credit crisis have cost carriers 2 ½ years of growth in passenger markets and 3 ½ years in the airfreight industry, so that 2010 will be “another spartan year” of cost controls and capacity caps, Bisignani said.

Global losses will amount to $5.6 billion this year, IATA reiterated, after a deficit of about $11 billion in 2009.

While the industry’s worst loss to date was almost $13 billion in 2001 following the Sept. 11 terror attacks, an $80 billion revenue decline last year was “vastly bigger” than anything previously experienced, IATA Chief Economist Brian Pearce said in a telephone interview. Net losses were limited only by a decline in oil prices, he said.

[This is a direct result of the insanity of the TSA and its counterparts worldwide. People do not believe the terrorism threat and more and more are simply refusing to fly at all. This will get much worse. As a result tickets that used to cost $350 now cost $850, which in and of itself is financially daunting.]

Bloomberg: Maybe A Secret Banking Cabal Does Run The World After All

January 29, 2010

AIG cover-up proof that “conspiracy theorists” aren’t so crazy, writes columnist

Bloomberg: Maybe A Secret Banking Cabal Does Run The World After All 290110top

Paul Joseph Watson
Prison Planet.com
Friday, January 29, 2010

In another measure of how what the establishment labels “conspiracy theory” is quickly becoming mainstream, Bloomberg News carries a story today acknowledging that those derided as “crazy” for warning that the world is run by a secret banking cabal have largely been proven right in light of the AIG cover-up.

“The idea of secret banking cabals that control the country and global economy are a given among conspiracy theorists who stockpile ammo, bottled water and peanut butter. After this week’s congressional hearing into the bailout of American International Group Inc., you have to wonder if those folks are crazy after all,” writes Bloomberg’s David Reilly today.

“Wednesday’s hearing described a secretive group deploying billions of dollars to favored banks, operating with little oversight by the public or elected officials.”

Reilly goes on to describe how the New York Fed conducted a backdoor bailout (or in plainer terms a wholesale looting of the taxpayer) of banks like Goldman Sachs Group Inc., Merrill Lynch & Co., Societe Generale and Deutsche Bank AG, and then sought to keep it secret from the public.

Reilly also highlights another telling quote by Representative Marcy Kaptur during the hearing on Wednesday, when she told Geithner, “A lot of people think that the president of the New York Fed works for the U.S. government. But in fact you work for the private banks that elected you.”

Reilly savages Tim Geithner’s denial of any involvement in the scandal and concludes with stating, “When unelected and unaccountable agencies pick banking winners while trying to end-run Congress, even as taxpayers are forced to lend, spend and guarantee about $8 trillion to prop up the financial system, our collective blood should boil.”

As we have constantly emphasized, as the global government and the financial takeover accelerates, it’s becoming harder and harder for the elite to hide the true intention of what they are doing, which is centralizing power into fewer hands, destroying sovereignty and creating a one world order run by an unelected, undemocratic authoritarian system.

So whereas “conspiracy theorists” were once sidelined as paranoid kooks, as more and more of what they warned about comes to fruition, they gain more credibility and the establishment finds it more difficult to neutralize what they are saying by means of character assassination.

The Bloomberg writer’s admission that the “conspiracy theorists” were probably right reminds us of former Clinton advisor Dick Morris’ appearance on Fox News last year, when he pointed out that people who have been sounding the alarm bells over a global government takeover for decades have also been vindicated.

“Those people who have been yelling ‘oh the UN’s gonna take over, global government’, they’ve been crazy but now – they’re right!,” stated Morris on Sean Hannity’s show.

Watch the clip below.

View the original article at Prison Planet

Paulson: 25% unemployment rate without AIG bailout

January 28, 2010

Ronald D. Orol
MarketWatch
Thursday, January 28th, 2010

Flashback: Paulson Threatened Great Depression, Food Riots To Get Bailout Bill Passed

Facing criticism on Capitol Hill, former Treasury Secretary Henry Paulson on Wednesday defended his decision to complete a $182 billion bailout of American International Group Inc., arguing that the unemployment rate would have risen easily to 25% without the bailout.

“If the system had collapsed millions more in savings would have been lost,” said Paulson, who was Treasury Secretary at the time of the bailout, at a hearing.

“Industrial companies of all size would not have been able to raise funding and they would not have been able to pay employees, this would have rippled through the economy.” Lawmakers grilled Paulson, arguing that government officials failed to obtain concessions for taxpayers.

Geithner Told To Quit After E Mails Reveal Involvement In AIG Cover-up

January 27, 2010

John Mica slams Treasury Secretary’s “lame excuses” during fiery hearing

Geithner Told To Quit After E Mails Reveal Involvement In AIG Cover up 270110top2

Paul Joseph Watson
Prison Planet.com
Wednesday, January 27, 2010

Treasury Secretary Timothy Geithner’s denial that he played any role in the AIG cover-up is contradicted by emails which confirm that both Geithner and the New York Federal Reserve were both intimately involved in keeping details about payments to banks including Goldman Sachs from the public.

Geithner told lawmakers today that he had no involvement in withholding information about the bailout of AIG, much to the chagrin of House Oversight Committee Ranking Member Darrell Issa, who wasn’t buying it for a second.

“He has asserted complete ignorance of the Fed’s efforts to cover up the bailout details,” said 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.”

John Mica of Florida went further, calling for Geithner to quit as a result of the scandal.

“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.”

Mica characterized Geithner’s denials as “lame excuses” as the Treasury Secretary became visibly angry.

In November and December 2008, The Federal Reserve Bank of New York, headed up by Geithner, 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, reignited the situation after they conclusively exposed a collusion between AIG and the Fed to deceive the public.

The e-mails between company and regulator 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, adding that taxpayers “deserve full and complete disclosure under our nation’s securities laws, not the withholding of politically inconvenient information.”

Geithner’s denial that he, even as President of the New York Fed, had no involvement with the AIG case is contradicted by fresh revelations this week in a new report issued by Issa that show Geithner was “at a minimum, engaged personally in reviewing what information about the AIG bailout would be revealed to Congress and the public.”

On November 6, 2008 Geithner received an email from Sarah Dahlgren, the FRBNY’s lead staff member in AIG’s operations, seeking Geithner’s approval for a proposed statement regarding AIG’s upcoming equity capital raise. The fact that Geithner’s approval had to be obtained merely for putting out statements concerning AIG clearly indicates that he was deeply involved in the matter.

On November 13, Geithner was sent a report on AIG’s restructuring that would be sent to Congress. Sophia Allison, a staff member of the Federal Reserve’s Board of Governors, asked that Geithner point out any information that he believed should not be “publicly disclosed”.

In addition, records of who Geithner met with during his tenure as President of the FRBNY “show that he was regularly engaged with top AIG officials and the FRBNY officials directly responsible for AIG’s disclosures to the SEC. Geithner’s schedule shows that he had at least six formal meetings with top FRBNY staff members about AIG-related issues between November 4, 2008, and November 21, 2008.”

Watch the clip from today’s hearings where Mica demands Geithner’s resignation.

Federal Reserve Moral Hazard Smoking Gun: In August 2008 Goldman Was Willing To Tear Up AIG Derivative Contracts, Offered To Take Haircut

January 26, 2010

Tyler Durden
Zero Hedge
Tuesday, January 26th, 2010

As observant readers will recall, a week ago we pointed out a letter in which the New York Fed’s Steven Manzari instructed AIG to stand down on all discussions with counterparties on “tearing up/unwinding CDS trades on the CDO portfolio.” At the time we focused on the word “stand down” as an indication of the Fed’s lead role in the process. At this point there is no doubt that the FRBNY, together with its law firm, Davis Polk, were in the pilot’s seat during the entire AIG negotiation, and while Tim Geithner may not have been the responsible man for this, someone must have been – and for the record, our money is a double or nothing on recently promoted FRBNY Senior Vice President Sarah Dahlgren, who as of January 21st is in charge of the Fed’s Special Investments [AIG] Management Group. We sure hope Sarah gets the chance to recall her memories beginning in the fateful month of September 2008 when she became the person in charge of the FRBNY’s AIG relationship. But back to the letter – little did we know that our focus was on the right sentence… but on the wrong word. What should have struck us front and center, was Habayeb’s admission that contract “tear downs” had been evaluated. This means that someone, aside from AIG, must have expressed an interest in a tear down, which if true would have dramatic consequences for the entire AIG debacle. Today, the WSJ presented the missing piece of the puzzle.

In tonight’s Heard On The Street section, the WSJ notes:

As everybody knows, AIG got a huge government bailout in September 2008 to help make payments on derivatives contracts with banks, including Goldman. Yet in the previous month, Goldman approached AIG about “tearing up” its contracts, according to a November 2008 analysis by BlackRock, then an adviser to the New York Fed. So was Goldman prepared to offer AIG a haircut in the month before its rescue? A legitimate question, given that Goldman refused to accept such a cut when the New York Fed raised the idea after it bailed out AIG.

The implications of this discovery are huge as they essentially destroy all the arguments presented by the FRBNY about an inability to extract concession out of Goldman (which being the largest AIG CDO counterparty, was the critical negotiating factor). It also casts doubt on the veracity of any arguments presented in Congress by Goldman representatives discussing the potential to take a haircut on their AIG exposure. What this means in plain English is that, in the month before the Fed entered the scene, GOLDMAN SACHS ITSELF OFFERED TO TEAR DOWN THE CDS ON AIG’S CDO PORTFOLIO (we don’t use caps lock lightly). This is basically a smoking gun on the moral hazard issue perpetrated by the FRBNY when it got involved, and indicates that through their involvement, Tim Geithner, Sarah Dahlgren or whoever, not only did not save US taxpayers’ money, but in fact ended up costing money, when they funded the marginal difference between par (the make whole price given to all AIG counterparties after AIG was told to back off in its negotiations) and whatever discount would have been applicable to the contract tear down that had been proposed by Goldman a mere month earlier. This, more so than anything presented up to now, is the true scandal behind the New York Fed’s involvement.

If this November Blackrock report indeed exists, and if Goldman did in fact offer to tear down contracts, this is an act of near criminal implications and heads at the FRBNY must roll immediately.

We hope this is the number one question asked by Chairman Towns of Mr. Geithner. But as the latter will plead the fifth due to his lack of involvement, we kindly suggest that the correct person, the person who can not claim lack of knowledge on the AIG situation due to a prior recusal, and is therefore the right person to grill before a live studio audience, is the FRBNY’s Sarah Dahlgren: as it stands, Wednesday will merely be yet another spectacle, in which Geithner will claim stupidity, and this time very likely get away with it: is there any wonder why he agreed to provide testimony so promptly after his “invitation.” What about Goldman’s Stephen Friedman – did he accept the invitiation yet? How about Goldman’s Hank Paulson? It sure must be nice to have the luxury to kindly decline the privilege of providing sworn testimony, and avoid perjury.

Goldman representatives, Lloyd Blankfein among them preferably, have to be on the stand next to Geithner, as they are the people who have bee at the core of this whole problem from the start till bitter end.

Last but not least, was it not Mr. Blankfein who just two weeks ago, before the FCIC committee, noted he had never gotten a request to take less than 100 cents on the dollar on AIG CDS? So what happens if it was he who offered less than 100 cents? Should that maybe have been at least mentioned in passing? Is that some equivalent of perjury, or will the semantics lawyers come out in force?

View the original article at Zero Hedge

Fed E-Mail to Geithner Cites Bank Benefit From AIG

January 25, 2010

Hugh Son
Bloomberg
Monday, January 25th, 2010

Timothy F. Geithner, who has denied that the financial condition of American International Group Inc.’s bank counterparties was a consideration in structuring the insurer’s bailout, was told by a senior colleague that the rescue was a way to remove “uncertainty” for the firms.

Buying mortgage-linked assets from banks was better “from a financial-stability perspective” than other plans to shield AIG from losses on contracts guaranteeing the bonds, Margaret McConnell, then a Federal Reserve Bank of New York vice president, wrote in an e-mail to Geithner on Oct. 22, 2008. Geithner, now Treasury secretary, led the New York Fed at the time of AIG’s rescue and McConnell’s e-mail.

The special inspector general of Treasury’s Troubled Asset Relief Program wrote in a 2009 report that Geithner said the New York Fed didn’t weigh the financial status of banks, including Goldman Sachs Group Inc., when deciding to fully reimburse them for $62.1 billion of devalued assets. U.S. Representative Darrell Issa, the ranking member of the House oversight panel that called Geithner to testify this week, has described the rescue of New York-based AIG as a “backdoor bailout” of banks.

The New York Fed weighed two other options for stanching losses tied to AIG’s credit-default swaps in the weeks after the September 2008 rescue, the inspector general, Neil Barofsky, said in the Nov. 17, 2009, report. One included asking counterparties to cancel their swaps and selling the underlying assets for an investment in a vehicle that would assume ownership of the securities. Another was for a Fed-backed vehicle to take over AIG’s responsibility of backing the assets.

Full article here


SEC mulled national security status for AIG details

January 25, 2010

Reuters
Monday, January 25th, 2010

U.S. securities regulators originally treated the New York Federal Reserve’s bid to keep secret many of the details of the American International Group bailout like a request to protect matters of national security, according to emails obtained by Reuters.

The request to keep the details secret were made by the New York Federal Reserve — a regulator that helped orchestrate the bailout — and by the giant insurer itself, according to the emails.

The emails from early last year reveal that officials at the New York Fed were only comfortable with AIG submitting a critical bailout-related document to the U.S. Securities and Exchange Commission after getting assurances from the regulatory agency that “special security procedures” would be used to handle the document.

The SEC, according to an email sent by a New York Fed lawyer on January 13, 2009, agreed to limit the number of SEC employees who would review the document to just two and keep the document locked in a safe while the SEC considered AIG’s confidentiality request.

Full article here

Paulson Asked to Testify at AIG Bailout Hearing With Geithner

January 16, 2010

Hugh Son
Bloomberg

Saturday, January 16th, 2010

Former Treasury Secretary Henry Paulson has been asked to join his successor Timothy Geithner in testifying before a House panel examining bailout payments to American International Group Inc.’s trading partners.

Paulson was invited to a Jan. 27 hearing set by Edolphus Towns, chairman of the House Oversight and Government Reform Committee, about the decision to fully reimburse AIG’s bank counterparties for $62.1 billion in derivatives. Stephen Friedman, the former Federal Reserve Bank of New York chairman who serves on the board of Goldman Sachs Group Inc., was also asked to appear, Towns said in a statement yesterday.

“Chairman Towns is well aware of the fact that President Bush’s Treasury secretary orchestrated this bailout,” Jenny Rosenberg, a spokeswoman for the New York Democrat, said in an e-mail explaining why Paulson was invited.

The request widens the probe into what lawmakers have called a “backdoor bailout” of banks that benefited from the $182.3 billion U.S. rescue of AIG. Geithner, who ran the New York Fed when AIG was saved in 2008, agreed to testify before the committee after Darrell Issa, a California Republican, released e-mails last week showing that the New York Fed asked AIG to withhold data about bank payments.

TuneUp Utilities 2010

View the original article at Bloomberg

New York Fed Faces House Subpoena Over AIG Bailout

January 12, 2010

Hugh Son
Bloomberg News
Tuesday, January 12, 2009

Jan. 12 (Bloomberg) — The Federal Reserve Bank of New York will be compelled to hand over documents related to American International Group Inc.’s government bailout after a House oversight committee chairman said he will issue a subpoena.

“To help the committee’s investigation of payments made by AIG to its counterparties, I am issuing a subpoena today to the Federal Reserve Bank of New York,” Edolphus Towns, the New York Democrat who runs the Oversight and Government Reform Committee, said in an e-mailed statement. “This subpoena will provide the committee with documents that will shed light on how and why taxpayer dollars were used for a backdoor bailout.”

TuneUp Utilities 2010

Towns’ attempt to force the New York Fed to provide documents comes after the ranking Republican on the committee, Darrell Issa of California, obtained e-mails showing the regulator pushed AIG to withhold information from public filings about payments to banks. The New York Fed in November declined to provide some documents Issa was seeking without a subpoena, Issa said in a letter to Towns today.

Treasury Secretary Timothy Geithner, who was president of the New York Fed when AIG was rescued, had been asked by Towns to testify during hearings scheduled for next week. The New York Fed’s general counsel, Thomas Baxter, said last week that Geithner wasn’t aware of efforts to limit New York-based AIG’s bailout disclosures because he didn’t think the issue merited Geithner’s attention.

Full story here.

View the original article at Prison Planet