Secretary Timothy Geithner needs to start giving some answers. Will the Congress compel him to start answering questions? In recent weeks, Republican investigators on the House Oversight Committee unearthed troubling evidence that the Federal Reserve Bank of New York, while under the leadership of Secretary Geithner, pressured American International Group (AIG) to conceal critical information from the Securities and Exchange Commission (SEC) about billions of dollars in counterparty payments made with taxpayer money.
Inadvertent reporting errors are one thing. Directing a bailed-out company to withhold crucial information from a government agency in order to keep the American public in the dark is another. Whether or not the United States Treasury Secretary was directly implicated in the scheme is a key question. Either he didn’t know and he was negligent or he did know and presided over a blatant attempt to withhold information from the American people.
In late 2008, while the U.S. taxpayers were on the hook for billions of dollars in cash infusions to float the toxic debt owed by AIG, Tim Geithner made the decision to cover AIG’s credit default swaps at full value. Those payments — made to counterparties like Goldman Sachs, Société Générale, and Deutsche Bank that had purchased AIG’s credit default swaps — were made at 100 cents on the dollar, instead of the reduced rate that AIG was actively negotiating with these firms.
The record of correspondence between representatives of the New York Fed and AIG now demonstrates that Geithner’s team was concerned about the controversy that full disclosure of the payments would create. So the New York Fed instructed AIG to delete references to the counterparty payment rate from its SEC filing, thus obscuring the full measure of the bailout bonanza made possible by U.S. taxpayers. In a move that has become altogether too familiar, a government agency run by Tim Geithner decided to keep the whole truth from the American people. Someone needs to be held accountable.
When then President-elect Obama announced his decision to appoint Tim Geithner to run the United States Treasury, he noted that Geithner was “an honest broker” who had “earned the confidence and respect of business, financial and community leaders; members of Congress; and political leaders around the world.”
At his confirmation hearing, Geithner was introduced to the Senate Finance Committee by Senator Chuck Schumer (D-NY) as the “very best” person to run Treasury and someone who “tried to raise awareness” and “call Congress’ attention to the inadequate powers and authorities of the Treasury Department and the Federal Reserve.”
I’m not sure what the President’s definition of the word “honest” or Senator Schumer’s understanding of the word “best” may be, but I sincerely doubt this is what the American people have in mind.
Secretary Geithner may have very reasonable and legitimate justifications for the role he’s played in the bungled AIG matter, or the forced merger between Bank of America and Merrill Lynch, or the problematic bailouts of General Motors and Chrysler, or the chronic failures of the Treasury Department to deliver basic transparency to the American people. The problem is the rigorous oversight that was promised by this Administration and by the Democrats who control the Congress have failed to yield the opportunities needed to get to the truth.
Over the past twelve months, the House Oversight Committee has held hearings on the numerous flaws in the AIG Trust Agreement and the reports of the Special Inspector General of the Troubled Asset Relief Program (SIGTARP). The Committee has held five separate hearings and multiple panels of witnesses on Bank of America’s acquisition of Merrill Lynch, yet Secretary Geithner has been noticeably absent from all of these proceedings. His absence, of course, is due to the fact that he’s never been invited to testify.
After a year of hearings and investigations, it is time for the Oversight Committee to hold Secretary Geithner accountable for the decisions he has made that continue to affect entire sectors of the American economy and the lives of millions of Americans. The American people deserve answers, and they deserve them now. Secretary Geithner must appear before the Committee to give those answers.