Friday, January 15, 2010
Here's a fascinating look into how the mind of Treasury Secretary Tim Geithner works. While others have focused on the comments about the AIG bailout, this item at the Business Insider providing a transcript of the objectionable comments, I was more taken by how Geithner doesn't "understand" certain concepts that everyone else does.
The transcript of the AIG-related discussion is below, but it's interesting to note the difference in tone when it comes to the issue he came to talk about - the AIG emails - versus the broader, more important questions posed at the three minute mark.
Since any sign of weakness is likely to be attacked by the financial media, it shouldn't be too surprising that both Fed Chairman Ben Bernanke and Geithner are mounting staunch defenses of their actions in recent years, Geithner going so far as to say it was "absolutely right" to pay 100 cents on the dollar in insurance claims against souring derivatives.
HARWOOD: As you know, you've been asked to testify before Congress about some memos that came out, Congressman Issa released regarding AIG and advice the New York Fed gave to not disclose the full repayments to some counterparties of AIG. Now, I know you've said that you--or your spokesmen have said that you were not involved in those memos. But did you agree with the advice in the memos? Was it sound advice?You can bet on Geithner's longevity at his current post over at Intrade.
Sec. GEITHNER: You know, I haven't looked at those memos, actually. I wasn't involved in that decision. But I do think the Fed--the Fed did disclose all that information subsequently. I think they made the right thing disclosing it. It's important for the American people to see all that information. But you know, John, what this is about is is a deep sense of anger and frustration that the government thought it was necessary to come in and prevent AIG from failing. That was a hugely consequential decision, a very offensive decision to most people. Deeply offensive to me, too. But it was necessary to do. And we did it in a way that I believe was not just least cost to the taxpayer, best deal for the taxpayer, but helped avoid much, much more damage than would have happened without that. If we could have done it differently, we would have done it differently. But this was the best way to do it.
HARWOOD: You still believe it was the right thing to pay counterparties 100 cents for the dollar?
Sec. GEITHNER: Oh, absolutely. Again, the way--this is a tragic failure in the system, and we had no effective legal means to step in and prevent default without doing what you said, helping this firm meet all its legal obligations. That's why at a centerpiece of the president's reform proposals is to give the government the tools to unwind, dismember, break up, sell these institutions without the taxpayer being put in the position of having to absorb their losses. That's the basic--one of the most important reasons why we have to get reform in place. We had no choice at the time other than to do this. And I'm, personally, very confident it was the right thing to do, and we did it in the best way possible for the American people.