Rep. Maxine Waters (D-Calif.) grilled Treasury Secretary Timothy Geithner on Tuesday about the role of investment bank Goldman Sachs in various government efforts to prevent a collapse of the financial industry.
During a contentious hearing before the House Financial Services Committee, Waters asked Geithner to confirm that his predecessor was a Goldman Sachs CEO, then followed up by questioning whether the firm would be one of five asset managers in the just-announced Public-Private Investment Program.
"It is possible that if they are qualified we would consider them along with everyone else," Geithner said.
"You hear a lot about the dissatisfaction about the bonuses," Waters said, "but underneath all of this is a conversation about the linkages and the connections of a small group of Wall Street types that are making decisions."
Waters advanced the linkage conversation by asking Geithner to confirm whether Goldman Sachs received TARP funds, whether Geithner's current chief of staff formerly worked for the firm, whether Goldman Sachs received funds from bailout-king AIG, and whether Goldman Sachs was somehow involved in the government's decision not bail out Lehman Brothers.
Geithner answered the last question in the negative. But as HuffPost's Tom Edsall documented:
The roots of the linkage between Goldman Sachs and AIG go back to the closing months of the Bush administration, as the financial meltdown reached crisis proportions and key decisions were made that are now reaping the whirlwind. Remember who played a key role in deciding to bail out AIG? Henry Paulson, the Goldman CEO-turned George W. Bush Treasury Secretary. Paulson, according to a September 27, 2008 New York Times piece by Gretchen Morgenson, led a team of regulators and bankers in early September to determine what to do with the most severely wounded financial institutions.
One of the participants in those meetings was Lloyd C. Blankfein, Paulson's successor at Goldman Sachs.
Out of those meetings came the controversial and heavily criticized decision to allow
Lehman Brothers, a Goldman competitor, to go belly up, and to bail out AIG. Starting with $85 billion from the Fed, taxpayers have pumped a total of $170 billion into the giant insurance company. The bailout was crucial to Goldman in that it permitted AIG to pay off its $12.6 billion debt to the firm, $8.1 billion of which was to cover AIG-backed credit derivatives.
"I am just asking the questions," Waters said, "because the talk is...that this small group of decision makers at the center of it is Goldman Sachs and that's what's causing a lot of the distrust, because people are thinking or believing that Goldman Sachs, because of the connections, have had a lot to do with the decisions that are being made."
Geithner took umbrage.
"I think it's deeply unfair to the people who are part of these decisions to suggest that they were making judgments that in their view were not in the best interest of the American people," Geithner said.
Waters herself has faced accusations of conflict of interest -- the finance committee member came under fire from watchdog groups when it was revealed that she may have played a role in Treasury's decision to send $12 million in bailout funds to OneUnited Bank, where her husband served as a board member. Waters addressed her critics in a HuffPost piece here.