Some questions for Timothy Geithner .....The answer is very simple for the "initiated few"......AIG is CIA2...., .
Timothy Geithner, President-elect Barack Obama's choice for Treasury secretary, has some explaining to do.
As president of the Federal Reserve Bank of New York, Geithner was a key decision maker in September when the government let Lehman Brothers fail and then, two days later, bailed out the insurer American International Group for $85 billion....plus an additional 47 Billions soon after..., so why did he do that?..... The answer is very simple for the "initiated few"......AIG is CIA2...., Lehman brothers is the quintessential Jewish Investment banker of last resorts....and the WASPS within the shadow government of the power behind the power in the good old US of A, wanted to take a shot at KILLING an acrimonious competitor to the established old houses......and BINGO, Lehman goes under.
Those decisions proved cataclysmic. The markets and the economy have yet to recover from Lehman's failure. The bailout of AIG dealt a further blow to the Fed's credibility - and, by extension, Geithner's - because it was an abrupt reversal from the no-new-bailouts stance that had applied to Lehman and, initially, to AIG. Together, the decisions showed that several months into the financial crisis, officials lacked the information and the insight to correctly call the shots.
Making matters worse, the Fed and the Treasury have changed their story about how the calamity unfolded. No one expects a perfect performance in the thick of a crisis. But an after-the-fact revision of what happened at best raises questions and worse, looks like an attempt to dodge accountability.
In testimony before Congress on Sept. 24, about a week after Lehman's collapse, Federal Reserve Chairman Ben Bernanke said that the failure of Lehman posed risks but that the firm's troubles had been well known for some time and investors recognized that bankruptcy was a significant possibility. Bernanke said Lehman's default, "while perhaps manageable in itself," combined with the "unexpectedly rapid collapse of AIG" to create a global financial tempest. In other words, Bernanke, Geithner and Treasury Secretary Henry Paulson believed the system was stable enough to withstand Lehman's downfall.
The story changed as they were proved wrong and as the government's obligations to prop up the financial system rose precipitously. In a speech on Dec. 1, Bernanke said "legal constraints" prevented the Fed from rescuing Lehman, making a bankruptcy "unavoidable." Translation: Not our fault!
The law allows the Fed to make emergency loans when the financial system is in danger, provided that the lending is "indorsed or otherwise secured" to its satisfaction. The Fed has accepted all manner of dubious assets in exchange for its various loans as the crisis has deepened. In a speech on Oct. 15 and in his Dec. 1 speech, however, Bernanke said Lehman's collateral was insufficient. Secretary Paulson also invoked a lack-of-legal-authority argument in a speech last month to explain Lehman's demise. Why didn't they say so at the time?
The burden is on Geithner to clear up the matter. If legal constraints precluded a Fed intervention in Lehman, why weren't they mentioned at the time? Did Fed officials consider asking Congress for the necessary authority? There was plenty of time to do so because, as Bernanke noted last September, the collapse of Lehman was a long time coming.
The revised version of the story sidesteps questions about whether the bailout of AIG - arranged by Geithner - was influenced by the specific needs of some of the insurer's counterparties, like Goldman Sachs.
Geithner should be asked at his confirmation hearing to explain which firms were threatened by an AIG collapse, in what amounts and how those entanglements justify an ongoing bailout. Geithner must also explain how such entanglements came to be the norm on his watch. His answers will help shed light on whether he is sufficiently distant from Wall Street to reform a system that has proved catastrophically unstable.
