We'll be posting regular updates of today's testimony at the House Committee on Oversight and Government Reform's hearing on the bailout of AIG -- which will feature Treasury Secretary Tim Geithner and former Treasury chief Henry Paulson. Check back here for the latest details.
UPDATE: 1:45 p.m. - Rep. Lynch Says Geithner "Scalped" The American People
When Rep. Stephen Lynch (D-Mass.) took his turn questioning Geithner he did not hold back, claiming that Geithner "scalped" the American people, and was "not consistently on the side of the American tax payer."
"You're supposed to be negotiating on the behalf of the American people... you had every opportunity, every opportunity, to weigh in on behalf of the American people and make these people take a new deal, make them take a haircut. You scalped the folks on Bear Sterns. Two cents on a dollar they got... The folks at Goldman Sachs got a hundred cents on a dollar. And that is just unacceptable."
"The disclosure was not there," Lynch said. "And that is just inexcusable. And it makes me doubt your commitment to the American people, it makes me doubt Mr. Paulson's commitment to the American people."
At the end of Lynch's extended and angry question, Geithner responded, "Congressman, I respect your opinion, I know you hold those opinions strongly, but I completely disagree."
WATCH the exchange:
UPDATE: 12:45 p.m. - Geithner To Rep. Mica: 'You Don't Know Me Very Well'
Rep. John Mic (R-Fla), who accused Geithner of offering "lame" excuses had a heated exchange with Geithner, which ended with a tense back-and-forth. Here's an excerpt (see video of the exchange below):
MICA: My final question is why shouldn't we ask for your resignation as Secretary of the Treasury? I didn't think you should be confirmed as the Secretary of the Treasury when it was revealed that you didn't pay your taxes because that's the highest financial responsibility position in the government...
GEITHNER: That is your right. You have the right to that opinion. I have worked in public service all my life. I have never been a politician. I have served my country as carefully and ably as I can. And it is a great privileged for me to work with this president to help repair the damage that was here when he took office, and i will continue to do so as long as he asks me to...
MICA: Again, I think you're punting the blame... I think you're trying to position yourself as the savior...
GEITHNER: (Interrupting) Congressmen, you don't know me very well...
MICA: (Interrupting) We're not getting the whole story, we're getting the lame story for a monumental back-door decision, a bailout...
UPDATE: 12:40 p.m. - Rep. Issa Still Pushing For AIG Disclosures
Obama administration scourge Darrell Issa (R-Calif.) announced Wednesday that congressional investigators have in their possession one of the most sought-after documents in the New York Fed-AIG saga: A detailed list of the souring assets taxpayers purchased from the world's biggest banks for 100 cents on the dollar.
The Federal Reserve Bank of New York initially pressured AIG to keep the list hidden from investors, regulators and the public. When it was eventually filed with the Securities and Exchange Commission, the SEC allowed the Fed and AIG to keep the details secret. A heavily-redacted version was made public last March. The details are hidden from public view until 2018.
Now Issa, the ranking Republican on the House Committee on Oversight and Government Reform, wants to make the whole thing public.
The document is part of 250,000 pages of internal documents on the AIG deliberations subpoenaed by the oversight committee.
It lists the toxic mortgage bonds that Goldman Sachs, Merrill Lynch and other banks insured through AIG. Those insurance contracts, called credit default swaps, are what the New York Fed ultimately took off AIG's books, paying the banks 100 cents on the dollar for souring mortgage bonds -- home mortgages that were bundled together and securitized. The banks could never have gotten anywhere near such a generous deal on the open market, so the move served essentially as a direct subsidy to those banks from taxpayers.
But taxpayers still don't know exactly what they own. The public knows that it owns a certain amount of assets, but none of the details. Taxpayers don't know which bundles of mortgages it purchased from AIG; how the banks were valuing those mortgages; how much collateral they had demanded from AIG on those securities; or which bank bundled those mortgages into securities.
In short, if Issa is successful in getting the document entered into the public record, taxpayers will finally know just how much they overpaid.
UPDATED: 9:00 A.M.
In prepared remarks from his highly anticipated testimony in front of the House Committee on Oversight and Government Reform today, Treasury Secretary Tim Geithner denied that the government's rescue of AIG was intended to benefit Wall Street banks. (SCROLL DOWN FOR HIS FULL REMARKS.)
"We did not act to protect the financial interests of individual institutions...We did not act to help foreign banks. We acted because the consequences of AIG failing at that time, in those circumstances, would have been catastrophic for our economy and for American families and businesses."
And Geithner also addressed the full ramifications of AIG's failure:
"AIG's failure directly threatened the savings of millions of Americans in ways that the Lehman
bankruptcy did not. AIG had provided financial protection to municipalities, pension funds, and other public and private entities through guaranteed investment contracts and products that protect participants in 401(k) retirement plans.
More broadly, if AIG had failed, the crisis almost certainly would have spread to the entire
insurance industry. Life insurance posed a particular threat. Many life insurance products are
effectively a form of long-term savings. In the wake of a failure of AIG, policy holders could
have sought to liquidate life insurance policies underwritten by AIG. Doubts about the value of
AIG life insurance products could have generated doubts about similar products provided by
other life insurance companies, opening up an entirely new channel of contagion."
Also scheduled to testify are Henry Paulson, the former Treasury Secretary; Elias Habayeb, former CFO of AIG's Financial Services Division; Thomas Baxter, executive vice president and general counsel for the Federal Reserve Bank of New York; Stephen Friedman, a Goldman Sachs director and chairman of the Federal Reserve Bank of New York; and Neil Barofsky, the special inspector General for the Troubled Asset Relief Program (TARP).
Read Secretary Geithner's full testimony.
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