On Capitol Hill to testify at a House committee hearing about his role in the bailout of AIG, Treasury Secretary Timothy Geithner defended government actions to rescue the insurance giant as “in the best interests of the American people,” but said he had no part in withholding information on the billions of dollars that went to big banks in the process.
“We did not act to protect the financial interests of individual institutions,” Geithner said in prepared testimony. “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.”
Members of the House Committee on Oversight and Government Reform took on a harsh tone in questioning.
In criticizing the government’s decision to make AIG counterparties whole for their investments, Rep. Edophus Towns, D-N.Y., said in opening remarks at Wednesday’s hearing that “[i]n effect, the taxpayers were propping up the hollow shell of AIG by stuffing it with money, and the rest of Wall Street came by and looted the corpse.”
Rep. Darrell Issa, R-Calif., told reporters before the hearing he has “lost confidence” in Geithner, who was head of the Federal Reserve Bank of New York at the time of the AIG bailout. Issa and Geithner had something of a testy exchange during the hearing over whether Geithner was involved in decisions to withhold information from the public about payments to AIG counterparties.
[Rep. Issa] asked if Mr. Geithner had “ever become involved with the Federal Reserve’s disclosure decisions with respect to counterparty claims” after he was nominated Treasury secretary.
“No, I did not,” Mr. Geithner said.
Mr. Issa promptly pulled up a slide showing a March 2009 e-mail message in which Mr. Geithner asked William C. Dudley, his successor at the New York Fed: “Where are you on the A.I.G. counterparty issue?”
Mr. Geithner began by saying: “Congressman, as you know, the question of disclosure was the subject of a huge amount of controversy…”
Mr. Issa cut him off, saying sarcastically: “You think?”
Mr. Geithner replied: “Yeah. That’s what my son says, and I agree with you.”
In a letter responding to questions from Rep. Issa today, Fed Chairman Ben Bernanke said he was not involved in negotiations with AIG counterparties. Bernanke’s nomination for a second term at the Fed has recently come under fire, and he is expected to go before a Senate vote tomorrow.
Also testifying before the House committee today was former Treasury Secretary Hank Paulson, who stated that he had “limited knowledge on the topic of immediate interest to the Committee,” and that he was not involved in the decisions to make payments to AIG counterparties.