Eliot Spitzer: Geithner's Disgrace

[girl gone mad]

Geithner's Disgrace
The new AIG report reveals how the Treasury secretary—and U.S. taxpayers—were fleeced by Wall Street banks.
By Eliot Spitzer, http://www.slate.com/id/2236460/">Slate

The issue has been festering for months: Why were AIG's counterparties—including Goldman Sachs, JPMorgan Chase, and UBS—paid 100 cents on the dollar when the feds rescued the insurance giant, helping raise the cost of the bailout to nearly $200 billion? A new report issued by Special Inspector General Neil Barofsky now reveals that government officials, notably then-New York Fed President and current Treasury Secretary Timothy Geithner, grievously damaged the nation and capitulated to the very banks they should have been supervising.

Barofsky's report reads like a case study in failed negotiation. The New York Fed didn't have the backbone to stand up to Wall Street, didn't understand its capacity to protect taxpayers, and didn't appreciate that its responsibility was to taxpayers.

Geithner and the Fed have proffered a series of spurious reasons for their willingness to pay AIG's counterparties—the leading Wall Street banks—in full while demanding concessions from every other entity with whom the Treasury or the Fed dealt. Geithner suggested he could not use the threat of AIG's default in the absence of a federal bailout to get concessions from AIG's creditors. Why not?

That is exactly what the government did with the auto industry, and rightly so. The entity providing financing to a near-bankrupt institution must always seek contributions from everyone else at risk. The fact that the Fed had a strong predisposition against letting AIG go into bankruptcy didn't mean the Fed shouldn't have used every opportunity to wrangle concessions from the other parties. For Geithner to say it would have been "unethical" to negotiate for concessions is sheer silliness. It is akin to saying that having decided that you are willing to pay up to $250,000 for a house, it is unethical to negotiate to buy it for $225,000.

Geithner also claims that using the possibility of AIG's default as a negotiating opportunity would have cast doubt on the government's commitment to financial stability. What? Seeking to get other parties to share the burden demonstrates a lack of commitment to restoring financial stability and market-based realities? Pressuring Goldman and the other counterparties to offer concessions would have forced them to absorb the consequences of making suspect deals with an insurance company that was essentially a Ponzi scheme. Forcing them to give concessions would have been one small step toward ending the moral hazard the Fed had allowed to flourish for years.

http://www.slate.com/id/2236460/">More...

[fascisthunter]

1. this will be damaging

and there will be no one else to blame for this.

[Octafish]

2. Foreign banks get more love than Detroit...

...or anyplace else that's not Wall Street.

Almost odd how Spitzer got singled out for destruction, considering Vitter in Pampers, Jeff Gannon and all the rest.

[ProSense]

3. Rewriting History to Blame Tim Geithner: An Incomplete Story of the AIG Bailout

Rewriting History to Blame Tim Geithner: An Incomplete Story of the AIG Bailout

[girl gone mad]

5. This might be a valid defense..

were it not for the fact that the administration took the opposite view on contract law when it came to bailing out the auto companies.

[ProSense]

6. Auto companies?

What do auto companies have to do with shadow banking?

[girl gone mad]

7. I think 99% of the people who read your link could make the connection.

[truedelphi]

11. If Brooksley Born had not been telling the inner Wall Street crowd, & the

Supposed Regulators" like Geithner about the HUGE POSSIBILITY that there would be ultimate failure, then we could say that our boy Timmy the Elf was blameless.

But she sounded the alarm, and Geithner was too caught up in following his Summers and Rubin connection back to Goldman Sachs to give a rat's ass.

And now that we have the First Wall Street President in office, we are not going to hear very much more from the New York Times about how bad it is that we have the likes of Geithner at Treasury rather than the more astute, and less GS-connected, Ms Born/.

[Bigmack]

18. How about a

Born-Warner, or Warner-Born ticket in 2012? Ms Bigmack

[midnight]

21. Greenspan stonewalled Brooksley Born with his manipulation of numbers.

Greenspan may have bet our country on his free market ideology, but does anyone believe that Rubin and Summers were doing anything other than protecting the enormous fraud-based profits that derivatives were bringing Wall Street? As Brooksley Born stressed, OTC derivatives are a “dark market.” There is no transparency. Regulators have no information on them and neither do purchasers.

Even after Long Term Capital Management blew up in 1998 and had to be bailed out, Greenspan, Rubin, and Summers stuck to their guns. Greenspan, Rubin and Summers, and a roped-in gullible Arthur Levitt who now regrets that he was the banksters’ dupe, succeeded in manipulating a totally ignorant Congress into blocking the CFTC from doing its mandated job. Brooksley Born, prevented by the public’s elected representatives from protecting the public, resigned.http://baltimorechronicle.com/2009/102709Roberts.html

[truedelphi]

24. Great link that one. thank you. n/t

[NJmaverick]

4. Nothing like seeing the posts of disgraced criminals getting recs

hatred has blinded many at DU

[unabelladonna]

8. what the....

eliot spitzer made a mistake. he wasn't the first and certainly won't be the last to be unfaithful to their spouse. wall street has been after him for some time and i wouldn't be surprised if he was set-up (yeah, nobody held a gun to his head). he did the decent thing for his family by resigning and ending the circus, but he's one of the smartest politicians we have and he knows the amorality and byzantine ways of wall street.NYS has suffered with gov. patterson who's in way over his head, i think we should listen to what eliot has to say.

[snagglepuss]

9. Hear. Hear.

:applause:

[NJmaverick]

12. You have a rather loose definition of a mistake, his actions were criminal

and they were deliberate not accidental.

[IrateCitizen]

23. Spitzer was a great AG, but as Governor he was a disaster.

He was already heading in the tank before his scandal hit. However, much of that had to do with his overzealous, heavy-handed governing style -- traits that helped him in a position such as AG, but were real liabilities for the position of Governor.

Note, none of this has anything to do with his intelligence, but rather with his personality.

Patterson hasn't been the best governor either, but at least he has been a politician wanting to face the truth of the dire fiscal situation of NY State. The problem is more in the hands of the state senate's refusal to address the state's fiscal crisis.

[truedelphi]

10. Are you aware tht the Bush Administration had to use the Homeland Security people to nail

Spitzer? And since he was not consorting with terrorists, in My Not So HO, all the wire transfer information should have been moot. Without the banking wire
transfers as evidence, no one could have inferred that Spitzer was consorting with escorts.

If there are not any laws on the books stating that Homeland Security personnel and technology cannot be used for going after political opponents -- then there really should be.

Spitzer is one of the few people who ever nailed Monsanto to the cross that it desserves to be buried with. He was an opponent of the Big Pesticide industry - and because of his fines against Mosnanto, you simply cannot find a single TV ad running anywhere that verbally states that pesticides are safe to use in the nursery or near a crib.

Yep, you will see that you can spray the stuff safely via the use of pictorials - the butterflies in cartoon-mode that are added to let you think the pesticides are safe. But you will never hear any verbal confirmation of this safety - as once when Monsanto ran an ad that verbally stated its products were safe, Spitzer fined them
$ 50,000.

Of course with Obama Adminstration in complete worship mode of Monsanto, this may change soon.

[NJmaverick]

13. Doesn't make his actions any less shameful or criminal

[unabelladonna]

14. shameful? criminal? it's kidstuff

compared to the utter comtempt wall street and the corporatocracy have toward us mere peasants. i have more respect for a man/woman who commits a quite personal indiscretion than for the way the american public is being f--ked by the PTB.

[C_Lawyer09]

15. Yes discreet and irrelevant to all voters but his family

We as Democrats really get on a slippery slope when we attempt to comptete with Republicans for the imaginary moral high ground. It would be terrific if kitchen table issues trumped reality t.v. show issues. We were shown first hand for eight years what the likability factor plus "religious morality" did for the working poor and middle class. Good post.

[pscot]

16. What crime did he commit?

He used his own money. The woman was a consenting adult. Judging by the comments, her mother had no objection. No charges were laid. If the feds had gone to court they might have had to explain why they were monitoring the banking habits of the governor of New York. I'll bet they didn't want to go there. As for the shame involved, I'm with Jesus on that one; let him who is without sin.... Spitzer lost his job and his political career is over, but you seem to want blood as well. Screw that.

[truedelphi]

17. And actually, it is not so much his blood that Powers that Be are

Acquiring but ours.

Elliot Spitzer is the only one who had power (That I know of, since Wellstone anyway) that gave a damn about We the Consumer.

He wanted to see that the hideous loans on huge margins made to inflate the CDO and the CDS markets were reviewed. He wanted to change and regulate the financial industry. And heck, if he was still in office, I bet he would be setting up some type of Consumer Watchdog group to stop foreclosures in New York State.

But hey, at least the Powers that Be got him reunited with his wife and able to spend lots of time with his family.

[Hawkowl]

20. Idiot

If he was in Nevada, it would've been legal. Prostitution should be legal everywhere. Just because something is illegal doesn't make it criminal. Jim Crow. Idiot.

[IrateCitizen]

22. Bollocks.

hatred has blinded many at DU

If there is any hatred, it is one born not of blindness but of utter disgust toward those who so readily and willingly sacrifice the public good upon the altar of high finance.

[notesdev]

19. was fleeced? Or was complicit in theft of taxpayer dollars?

There comes a point where you have to say that maybe, just maybe, the guy who used to be President of the Federal Reserve Bank of New York and is not the Secretary of the Treasury of the United States just isn't that naive.

He is on THEIR side helping them take as much of OUR money as they can get away with. A nice, cushy 7-figure private sector job surely awaits him as his reward.

[sendero]

26. There are a lot of folks..

... around here that are so naive one wonders how they survive day to day.

[whistler162]

25. unrec for anything written by Spitzer