Wednesday, February 29, 2012

Timmy's Troubles

Updated March 3, 2012
Created February 27, 2012
Former Forbes Asia desk editor Ben Fulford wrote:
"As predicted, the collapse of the Satan worshipping financial mafia is accelerating. U.S. Treasury Secretary Timothy Geithner was detained for questioning by New York police on February 24th and was released after giving evidence about many high level financial criminals, according to New York police sources. “In most cases we have to slap people to get them to talk but in his case we had to slap him to shut him up,” one of the interrogators joked. Geithner has been released but is accompanied at all times by an armed deputy to make sure he does not leave the country."
Update 3/3/12 Bloomberg reports
The Federal Reserve Bank of New York, then led by Timothy Geithner, told American International Group Inc. (AIG) to withhold details from the public about the bailed-out insurer’s payments to banks during the depths of the financial crisis, e-mails between the company and its regulator show.
...The New York Fed took over negotiations between AIG and the banks in November 2008 as losses on the swaps, which were contracts tied to subprime home loans, threatened to swamp the insurer weeks after its taxpayer-funded rescue. The regulator decided that Goldman Sachs and more than a dozen banks would be fully repaid for $62.1 billion of the swaps, prompting lawmakers to call the AIG rescue a “backdoor bailout” of financial firms.
...“It appears that the New York Fed deliberately pressured AIG to restrict and delay the disclosure of important information,” said Issa, a California Republican. Taxpayers “deserve full and complete disclosure under our nation’s securities laws, not the withholding of politically inconvenient information.”
[Rep.] Issa requested the e-mails from AIG Chief Executive Officer Robert Benmosche in October after Bloomberg News reported that the New York Fed ordered the crippled insurer not to negotiate for discounts in settling the swaps. The decision to pay the banks in full may have cost AIG, and thus taxpayers, at least $13 billion, based on the discount the insurer was seeking.         
The e-mail exchanges between AIG and the New York Fed over the insurer’s disclosure of the transactions show that the regulator pressed the company to keep details out of the public eye. Issa’s comments add to criticism from Republican lawmakers, including Senator Chuck Grassley of Iowa and Representative Roy Blunt of Missouri, who wrote letters in the past two months demanding information from Geithner, 48, about the costs of the AIG bailout.
Barney Frank, a Massachusetts Democrat and chairman of the House Financial Services Committee, said the e-mail exchanges were “troubling” and that he supports holding congressional hearings to review them.
Under pressure from lawmakers, AIG disclosed the names of the counterparties, which included Deutsche Bank AG and Merrill Lynch & Co., on March 15. The disclosure said AIG made more than $27 billion in payments without identifying the securities tied to the swaps or listing the value of individual purchases by each bank, details the Fed wanted to keep out, according to the March 12 e-mail from AIG’s Shannon.
Earlier that month, Fed Vice Chairman Donald Kohn testified to Congress that disclosure of the counterparties would harm AIG’s ability to do business. The insurer agreed to turn over a stake of almost 80 percent in connection to its bailout.
CNN reports an unnamed source provided them with the counterparty list which includes many more just the German based Deutsche Bank AG and Merrill Lynch. However the list does not list amounts paid to each.  However the New York Times does provide us with some but not all of the amounts paid. The list is assumed to be in order of importance:

  1. Société Générale (France) ($12 billion)
  2. Goldman Sachs (USA) ($12.9 billion)
  3. Merrill Lynch International (USA) ($6.8 billion)
  4. Deutsche Bank (Germany) ($12 billion)
  5. Calyon, Crédit Agricole (France)
  6. UBS (Switzerland) ($5 billion)
  7. Barclays (England) ($8.5 billion)
  8. Barclays Global Investors(England)
  9. Coral Purchasing, DZ Bank (Germany)
  10. Bank of Montreal (Canada)
  11. Rabobank (the Netherlands)
  12. Royal Bank of Scotland (Scotland)
  13. Bank of America (USA) ($5.2 billion)
  14. Wachovia (USA) ($1.5 billion)
  15. HSBC (UK)
  16. Citigroup (not on CNN's list) ($2.3 billion)
  17. JP Morgan (USA)
CNN also reports: 
A.I.G. also named the 20 largest states, starting with California, that stood to lose billions last fall [2008] because A.I.G. was holding money they had raised with bond sales.
In total, A.I.G. named nearly 80 companies and municipalities that benefited most from the Fed rescue, though many more that received smaller payments were left out.  
Stanford University provides us this interesting graphic of the AIG Bailout Counterparty payments which is more forthright than either the Bloomberg, CNN or WSJ reports. And people trust these papers for financial information?  The chart doesn't agree with the so called financial press as to CDS counterparty payouts!  I trust the chart.

Fox News Reported this on February 29th.  It appears Geithner really was arrested by New York police and questioned then released. Apparently this is related to Timothy Geither's role as the head of the New York FED telling AIG not to disclose the counter party risk and that these payouts were because of synthetic financial derivative products.  There's some really crazy legal legal issues which Geithner is embroiled in, Judge Napolitano explains it better than I can.

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