The Geithner AIG Scandal
Treasury Secretary Tim Geithner's answer on the the question of why AIG counterparties (most prominently Goldman Sachs) is laughably absurd:
Representative Dennis J. Kucinich, Democrat of Ohio, excoriated the New York Fed’s decision to pay 100 cents on the dollar to A.I.G.’s counterparties, including $2.5 billion to Goldman Sachs. “Isn’t it true that the New York Fed gave Goldman Sachs a better deal than it could have ever expected from A.I.G. or any other market player?” Mr. Kucinich asked.
Mr. Geithner replied: “Under the laws of the land, we did not have the ability. So we faced a very simple choice: Let A.I.G. default, or prevent it. And there was no way — financial, legal or otherwise — we could have imposed haircuts, selectively default on any of those institutions, without the risk of downgrade and default.” Mr. Geithner added that the negotiating position of A.I.G. was weak. With the ability to threaten default or allow A.I.G. to restructure in bankruptcy, negotiators were not in a position to make banks to take less on their contracts.
This is ridiculous. I'll explain why on the flip.
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