Geithner's days are numbered

Near the top of President Barack Obama's To Do list for 2010 should be finding a new Treasury Secretary. It's hard to see how Tim Geithner is going to recover from recent revelations about his role in the AIG bailout that saw counterparties like Goldman Sachs paid 100 cents on the dollar when, during that time, everyone else was getting a major haircut. From 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.

The translation of the key words in the first paragraph - "withhold details" - when combined with those in the second paragraph - "Goldman Sachs", "100 cents on the dollar", and "credit-default swaps" - is relatively straightforward - "Geithner", "step", "down".

The urge for the White House to act is sure to quickly intensify as soon as everyone in Washington realizes that their number one priority in 2010 is not to shed those extra pounds put on over the holidays, but to do what politicians do during election years.